Indonesia has emerged as one of the largest producers and consumers of tires in the dynamic South East Asia region during the last decade. The country boasts some of the leading names in the global tire industry and has witnessed a period of high growth followed by a lull in demand over the last ten years.
The first half of the last decade saw dramatic growth in installed capacity and production, while the second half of the decade was relatively calm. A slew of leading global tire manufacturers has also come to the country for production in the last decade.
In 2021, the volume of domestic tire production increased by 38% to 193 million units. Approximately 79.5 million units, among others, were car tires. Of the units produced, 30% of the total output was absorbed by domestic market, while 70% were exported. Indonesia’s passenger car and truck tire market grew from 24.1 million tires in 2020 to 28.9 million tires in 2021, an increase of 19.9%. Both the OE and replacement segments increased by 47.1% and 8% respectively.
In addition to the domestic market, Indonesian tire producers have been able to gain a major share in a number of export markets. Low production costs in the country have enabled domestic tire producers to gain a significant competitive advantage in export markets.
However, there is no doubt that the emergence of Indonesia as an automotive production hub during the last decade has been one of the most important factors behind the success of the Indonesian tire industry. The Indonesian automotive industry grew by 17.82% in 2021, after a year marred with COVID-19. According to the Association of Indonesia Automotive Industries (Gaikindo) report, wholesale car sales, or distribution from factories to dealers, grew by 66% year-on-year (yoy) to 887,202 units.
Natural Rubber Advantage
Indonesian tire producers have a huge advantage in terms of availability of raw materials. The country is the second-largest producer of natural rubber and in 2021, 3.12 million tonnes of natural rubber was produced in the country.
The tire industry consumes more than 250,000 tons of natural rubber per year, nearly 40% of the domestic natural rubber consumption. The availability and pricing of natural rubber is one of the key strengths of the Indonesian tire manufacturing industry.
Major Tire Producers in Indonesia
The Indonesian tire manufacturing industry is comprised of 14 large and mid-sized companies.
With a total production of 39.6 million tires in 2021, PT Gajah Tunggal Tbk, of which Michelin owns a 10% stake, is among the largest tire producers in Indonesia. The company operates a total of five integrated tire plants that produce a wide range of products such as passenger car radial tires (PCR), truck and bus bias tires, motorcycle tires, truck and bus radial (TBR) tires as well as inner tubes for both motorcycles and motor vehicles. It also has facilities to produce certain accessories such as flaps and rim tape.
The company’s total production increased from 33.6 million tires in 2020 to 39.6 million tires in 2021, with all tire segments contributing positively. Passenger car tire production increased from 11.6 million tires in 2020 to 12.4 million tires in 2021, while truck and bus tire production increased from 0.6 million tires in 2020 to 0.7 million tires in 2021. Motorcycle tire production increased from 18.5 million tires in 2020 to 23.0 million tires in 2021.
PT Bridgestone Indonesia
Operating in Indonesia for more than 46 years, PT Bridgestone is among the largest tire producers in Indonesia. The company operates two production plants in the country. Its Bekasi (West Java) facility has an installed capacity of 14,000 units per day. Bridgestone’s second production facility is located in Karawang (West Java) and has an installed capacity of 27,500 units per day.
PT Michelin Indonesia
Global tire manufacturer Michelin entered Indonesia by acquiring 80 percent of the Indonesian tyre firm PT Multistrada in January 2019 for $439 million as part of its expansion strategy to increase its market share in Indonesia.
PT Multistrada’s factory is located in Cikarang, Bekasi, West Java. The company has a production capacity of more than 180,000 tons of tires which include about 11 million passenger car tires, 9 million two-wheeler tires and 250,000 truck tires. In 2021, the company produced 7.99 million car tires and 4.68 million motorcycle tires.