With no end in sight to trade tensions between the United States and China, domestic tire producers may bear the brunt of the spat as a revision to a ministerial regulation has made it easier for tire products to enter the Indonesian market, Fitch ratings agency has said in a statement.
Trade Ministry Regulation No. 6/2018 effectively authorizes imported products, in this case tire products, to be checked outside of customs, as part of the government’s broader effort to debottleneck lines of goods checked in customs areas in a bid to improve efficiency.
“The revised regulation has simplified the procedure for tire imports, and gives incentives to overseas manufacturers to sell more products to Indonesia,” Fitch said in a statement. “The situation is crippled further by the imposed tariffs on China’s exports to the US, including tire-related products, which may force Chinese manufacturers to divert trade to new markets, including Indonesia.”
However, the agency said the recovery of automotive sales in the first half would likely offset the short-term negative impact for local tire manufacturers as both car and motorcycle sales recorded doubledigit growth in the first half.
Trade Ministry data show that tire imports increased to US$158 million in the first half of the year, a 90 percent year-on-year (yoy) increase from the $83 million earned over the same period last year.
“Imported tires would flood the local market if the trade war continues in the long-term, which we believe may further undermine the business profile of local manufacturers that are already in an oversupplied market environment,” Fitch said.
(source: The Jakarta Post)