Days ago, we came across a report where Indian car manufacturers Tata and Mahindra got one of their biggest export orders to Indonesia. As part of the order, Mahindra and Tata Motors had to supply a total of 1.05 lakh units of LCVs and pickup trucks to Indonesia as part of President Prabowo Subianto’s Merah Putih Village Cooperative programme. However, it looks like the programme has now hit a roadblock, as Indonesia has asked the manufacturers to pause the order until further notice.
Tata, Mahindra Say Deal Intact
After the reports of this temporary pause came online, both Mahindra and Tata Motors in separate statements told that they have not received any official communication about the same and they have everything in place and the exports are expected to start soon as per the schedule. They also added that the advance payment of the order has been made.
There are multiple reasons why Indonesia has put a pause on this order at the moment. The proposed order of the pickup trucks and LCVs was mainly aimed at strengthening rural cooperatives across Indonesia. The government has now decided to pause this order after political pushback and concerns over the domestic automobile industry.
After reports of this Indian vehicle import programme circulated in the media, many people came forward and criticised the authorities. This included both lawmakers and people from the automobile industry. Deputy Speaker of Parliament Sufmi Dasco Ahmad asked the authorities to postpone the plan temporarily and also requested a full review of the plan.
The Finance Minister of Indonesia supported this stand and said that the President has been focusing on improving the domestic market. The major reason for this controversy is the current situation of Indonesia’s automobile sector, which is currently going through a bad phase. Car sales in the country went down by 7.2 percent last year amid weak household spending and cautious lending conditions. Major carmakers in the country like Toyota, Suzuki, and Mitsubishi are still struggling to regain their pre-pandemic momentum.
In a situation like this, where domestic players are struggling, the government decided to place a huge order to import trucks and LCVs from another country instead of helping domestic manufacturers. This is what has drawn criticism in this case.
The Industry Minister of Indonesia has said that the automobile sector in Indonesia has the capacity to produce around 1 million pickup trucks annually. If the order had been given to domestic players, it would have helped them economically and also resulted in job creation.
Mahindra and Tata had already started preparing for the order. In fact, Mahindra had already shipped 1,000 units of Scorpio pickup trucks to Jakarta. The authorities said that any vehicle that has already arrived in the country won’t be distributed until they receive an official order from the concerned authorities.
Mahindra had received an order to supply 35,000 Scorpio pickup trucks, while Tata had received an order for 30,000 Yodha 4x4 trucks and 30,000 Tata Ultra T.7 6-wheel trucks as part of the deal. While Tata already sells these models in Indian market, the Scorpio pick up truck is currently manufactured in India only for the export markets like South Africa and Australia. The vehicles were meant to be deployed to support logistics, food storage, fertiliser distribution, and agricultural supply in Indonesia. The government had planned to fund the vehicle purchases through state-backed mechanisms, reportedly involving around Rp40 trillion per year over six years.
Via Bloomberg