GM Retreats From Indonesia In Major Blow To Emerging Markets Strategy

Indonesia has long been touted as one of the next major emerging markets, and only four years ago, GM was set to make a major push in the Southeast Asian nation. But in a major about face, GM is essentially giving up on Indonesia, ending an 80 year manufacturing presence and transitioning solely to a sales and marketing arm.According to Re uters, GM will shutter its Bekasi factory which was producing the Chevrolet Spin minivan, a product that GM intended to go up against market leader Toyota and its Avanza minivan. Toyota dominates 90 percent of the Indonesia market and the Avanza is Indonesia’s most popular car. Of the top ten selling vehicles in Indonesia, the Spin ranked in 8th place last year, with brands like Toyota, Honda and Daihatsu (another Toyota brand) dominating the market.Indonesia is a particularly enticing market for many auto makers. It is the most populous nation in Southeast Asia and the largest economy in the region as well. It also has one of the lowest rates of car ownership, with 32 vehicles per 1,000 people, compared to 132 per 1,000 people in Thailand and 300 per 1,000 people in Malaysia. The locally built Spin was supposed to give GM a leg up in Indonesia, but as another Reuters piece notes, GM only advanced seven tenths of a percent in market share during their 80 year run in Indonesia.Reuters claims that GM will pivot to a more SUV and truck focused brand, along with establishing a foothold for its Chinese affiliate brands like SAIC’s Wuling. But the minivan is Indonesia’s most popular vehicle, since it allows for carrying multiple passengers in comfort while the high ground clearance is suited for the frequent floods and rough terrain of the island nation. While Wuling offers some low cost vans, offerings like Chevrolet’s Trailblazer and Captiva will likely be more expensive while offering qualitative disadvantages.GM’s Stefan Jacoby told the news service“We could not ramp up Spin production to boost the volume as we had expected … although the product was really good. The logistics chain of the Spin was too complex; we had low volume so we could not localize the car accordingly, and from the cost point of view we were just not competitive.”While the Spin is popular in Brazil and other markets, it was unable to dethrone the Avanza, which uses crude but cost-effective body on frame construction which means it can be manufactured in a relatively easy, inexpensive fashion. Jacoby claims that the end goal is to turn Indonesia “into a sustainable business model.” If the last 80 years are any indication, it’s not looking good.