Chinese automakers are going to Indonesia to mine minerals.

Chinese car companies are expanding overseas in new ways.

In the past, when our car companies went global, they generally had two directions.

One was to head west to capture the high - end consumer markets in developed countries; the other was to go south to build independent production supply chains in South America and Southeast Asia.

Recently, a new idea has emerged: going to Indonesia to mine minerals.

Indonesia is thousands of miles away from China and is an archipelagic country. According to official statistics, it has no less than 17,000 islands, and thousands of them are inhabited. There's no doubt that logistics costs are high.

However, Chinese car companies went there in groups at an early stage.

Wuling was the quickest. It entered the market in 2015, bringing many supply - chain enterprises with it.

Now, many of the upstream enterprises that went there together at that time have taken root in Indonesia and achieved broader cooperation.

Chinese car companies in Indonesia adhere to long - termism.

They don't seek immediate profits but aim to hold their ground and lay a more solid foundation for future development.

The world is diverse, and Indonesia is underdeveloped

Looking at Indonesia, we can find that most Chinese car companies have entered the market to varying degrees.

BYD, Wuling, Chery, Geely, XPeng, Great Wall...

Wuling cars in Indonesia

However, if they want to sell cars in Indonesia, they have to pay some tuition fees, learn some lessons, and seriously understand the diversity of this world.

When Chinese car companies go to Indonesia, the first things they notice are the poor transportation and the extremely low national income.

Java, the core area of Indonesia, covers an area of 132,200 square kilometers. Although it only accounts for 6.6% of the country's total area, it is home to 150 million people.

To put it more intuitively, Java, with a land area more than eight times that of Beijing, has a population nearly seven times that of Beijing.

Compared with Beijing's traffic conditions, Indonesia has fewer roads, narrower streets, and chaotic traffic.

Previously, Castrol, a lubricant - selling company, and TomTom, a GPS producer, conducted a survey. Among 78 famous cities around the world, Jakarta, the capital of Indonesia, ranked first in traffic congestion.

Data shows that drivers in Jakarta brake an average of 32,800 times a year, far exceeding the global average of 18,000 times in other cities.

Due to the poor traffic, the public transportation capacity is naturally not good. People either ride their own motorcycles or take "ojeks" (motorcycle taxis) when going out. So every household in Indonesia has a motorcycle, and in many families, there is one motorcycle for every two people.

During traffic jams in Indonesia, four - wheeled and two - wheeled vehicles can be tightly packed together

Moreover, most roads in Indonesia are two - way single - lane or one - way roads, and a considerable number of roads are not even paved.

So when Chinese car companies go to Indonesia, it's like an iPhone, which pursues intelligence and a sense of technology, suddenly encounters a group of buyers who want a Nokia phone.

What's cruel is that this group of buyers is extremely large, almost equivalent to the entire population of Indonesia.

The local government has been trying to solve the traffic problem. For example, it built a bus rapid transit system in 2004, and the first subway line was officially opened in 2019.

The Jakarta - Bandung High - Speed Railway, a key infrastructure project built by China, is connected to the Jakarta subway at Halim Station.

However, upgrading urban roads is not simply about demolition and reconstruction. It requires adapting to local conditions based on the city's buildings and supporting facilities.

Narrow streets in Indonesia

Due to the cultural tradition of loving the land, most Indonesians prefer to live in bungalows or single - family houses of two or three stories. Even if the government encourages them to live in high - rise buildings, they are reluctant to do so.

So in Jakarta, there are only some apartment buildings in the most prosperous central area, and most of the surrounding areas are low - rise buildings.

The low building volume ratio and large land occupation by houses naturally compress the space for urban roads to the extreme.

Most of the people living in these single - family houses and bungalows have low incomes.

According to data released by the Indonesian official standard (BPS) in March this year, 8.47% of the Indonesian population belongs to the poor class, with a monthly expenditure of less than 609,160 Indonesian rupiahs, equivalent to about 200 - 300 Chinese yuan.

They mainly rely on street vendors for daily necessities, and their consumption habits are completely isolated from the modern shopping system.

People in the slums of Indonesia

Next, 24.42% are economically vulnerable people, whose incomes can only cover daily expenses and have little ability to deal with diseases and accidents. And 49.29% are near - middle - class, with a monthly expenditure of about 2.6 million - 6 million Indonesian rupiahs, equivalent to about 1,200 - 2,800 Chinese yuan.

Together, these people account for more than 80% of the Indonesian population.

The remaining part includes 17.25% of the middle - class, with a monthly consumption of 2 million - 9 million Indonesian rupiahs, equivalent to 900 - 4,000 Chinese yuan.

If we add up the poor, the middle - class, and the near - middle - class mentioned above, we get a group that accounts for more than 99% of the country's population.

The proportion of the rich is less than 1%.

The low national income is also a historical problem.

During the Asian financial crisis in 1998, foreign capital in Indonesia fled rapidly. The industrial system, lacking financial support, suffered a setback, and the country prematurely entered the stage of "de - industrialization". So Indonesia's industry has remained at a low level, only covering basic livelihood needs.

Indonesian street stalls, presenting a completely different picture from large shopping malls

So Indonesia's economic policies are like walking on a tightrope. It has to attract foreign investment while controlling the scale to prevent foreign enterprises from being too dominant and seizing the market share of local enterprises.

Naturally, a lot of relevant policies have been introduced. Here, we'll talk about two of the most important ones.

One is the "Indonesian Standard Classification of Business Fields (KBLI)". Chinese enterprises going to Indonesia must establish local companies as required and pay a registered capital of no less than 10 billion Indonesian rupiahs (about 4.5 million Chinese yuan at the current exchange rate).

The KBLI code has a lot of subtleties. It marks the "risk levels" of different industries, and enterprises need to be supervised and reviewed by relevant departments under the categories they choose.

So if they choose the wrong category, the business application will be rejected, and months of time and effort will be wasted.

The other is the "Local Content Requirement (TKDN)". Foreign enterprises must have a certain proportion of components produced or purchased locally in Indonesia to enjoy policy benefits. Otherwise, it may even affect product sales.

These policies are like increasing requirements. If foreign enterprises are half - hearted and don't want to localize, they won't be able to succeed in the Indonesian market.

It's obvious that Chinese car companies need to make a lot of preparations when going to Indonesia.

Costs can't be saved, and risks can't be avoided.

So how can they make it a little easier?

Chinese car companies are feeling their way forward

In Indonesia, Chinese car companies first have to face Japanese cars.

According to the automotive sales data disclosed by Indonesia, in March this year, the car company with the highest sales volume was Toyota from Japan, with 22,476 vehicles sold, followed by Daihatsu, a brand under Toyota, with 13,075 vehicles sold.

Right behind them are three other Japanese car companies, Honda, Mitsubishi, and Suzuki, with sales volumes ranging from 4,000 to 7,000 vehicles.

The Chinese car company with the highest sales volume can only rank sixth.

So many Chinese people working in Indonesia think that there are Chery, Wuling, and BYD cars everywhere on the streets of Indonesia. In fact, it's a bit of "selective attention".

After all, it's natural to feel a sense of familiarity when seeing cars from home in a foreign land.

Half a century has passed since the 1960s and 1970s, and Japanese cars have always been the dominant players in the Indonesian market.

When Chinese car companies go to Indonesia, it's almost like snatching food from the tiger's mouth.

However, from a development perspective, the half - century - long development of Japanese car companies in Indonesia provides the most practical reference for Chinese car companies.

Initially, Indonesia's automotive industry was actually started by the Americans.

In 1927, Ford Motor from the United States, which had just made a fortune with its popular Model T, opened an overseas factory in Indonesia.

Unfortunately, Ford came too early and didn't catch a good opportunity.

From the 1920s to the 1960s, Indonesia was in a difficult situation both at home and abroad.

Externally, it was severely impacted by the global economic crisis and World War II; internally, it experienced the independence war and regime changes.

The national economy was in recession, and people's incomes were low, so there was little motivation to buy cars.

Meanwhile, the high logistics costs, high assembly costs that couldn't be reduced, and the punitive tariffs imposed by Indonesia on its vehicle exports made Ford's business in Indonesia mediocre and even led to losses.

It wasn't until the 1960s that Japanese car companies, represented by Toyota and Mitsubishi, came to Indonesia using a unique "packaged supply - chain overseas expansion" model to avoid Indonesia's policy sanctions, and the Indonesian automotive market became prosperous.

The so - called "packaged supply - chain overseas expansion" means that Japanese car companies brought the entire upstream supporting industrial chain with them when they expanded to Indonesia and carried out production in a closed ecosystem.

This triggered resistance from Indonesians.

In 1974, when former Japanese Prime Minister Kakuei Tanaka visited Indonesia, local people spontaneously organized large - scale anti - Japanese riots. Some people even gathered on the streets, overturning, burning, and smashing Japanese cars.

An old photo of the anti - Japanese movement in 1974, showing a burned Japanese car and an arrested perpetrator

In the 1990s, to break the industrial barriers set up by Japanese enterprises and force them to drive the development of local enterprises, Indonesia launched a "pioneer plan", offering tax incentives and other benefits to encourage foreign car companies to use local components.

However, the Japanese side thought it was unreasonable and, together with the United States and the European Union, sued Indonesia at the WTO.

After Indonesia's defeat, the pioneer plan to support the local automotive industry came to an end.

So in the eyes of ordinary people, Japanese cars in Indonesia are cost - effective, but in the eyes of the Indonesian upper class, they are like a poison pill, suppressing the development of the country's own industry.

Where there are gaps, there are opportunities.

When Chinese car companies expand to Indonesia, they have grasped an important keyword: cooperation.

Currently, almost all Chinese car companies that have gone to Indonesia have established various degrees of cooperation with local enterprises.

For example, Geely, Chery, XPeng, and Nezha have all cooperated with Handal Indonesia Motor (HIM) to achieve the CKD (Completely Knocked Down) assembly model. XPeng's G6 and X9 models are assembled and produced at HIM.

This operation not only reduces the tariff and service costs for Chinese enterprises but also meets the local content requirements.

Meanwhile, some Chinese car companies also use components produced by local Indonesian enterprises, bringing a large number of employment opportunities to the local area.

There is an automotive industry corridor between Jakarta and Bandung in Indonesia, where many Chinese enterprises have gathered

Of course, the two Indonesian companies, ERAL and X - Motors, also contributed to the popularity of Chinese cars. The local sales and after - sales services of Chinese brands such as XPeng, Chery, and Great Wall are completed through cooperation with these two companies.

The cooperation is all - round, and the services are very meticulous.