Breaktrough in Policy and Business Innovation Effort

Toward Global Market

Case Study : LCGC (Low Cost Green Car) Business Effect
to Indonesia and Global Market
Presented in International Seminar
at Royal Melbourne Institute of Technology Vietnam
Ho Chi Minh City, 20 September 2016

Magister of Management, Postgraduate Program,

Faculty of Economics & Business
University of Singaperbangsa Karawang
2016

Abstracts
Indonesia has experienced National Car program. The first was at middle of 90
s.
Due to 1998 financial crisis, tax facility cancelled by IMF and step down of
Soehartos goverment, National Car program was uncontinued.
2nd program is LCGC a Breaktrough Policy of former President of Indonesia
Susilo Bambang Yudhoyono. Supported by 5 Car maker (Toyota, Daihatsu,
Suzuki, Honda and Nissan ) but in the other hand , House of Representative
was not full supported. And the first period of recent goverment was not
supported to. However it is still running and success.
For Car maker that is Business innovation , to boost market not only for
local market but to global market. Data 2015 from GAIKINDO ( Assosiation of
Indonesia Automotive Industry ) sales of LCGC was 165,434 unit, 16,3% from
National sales and some exported for Global Market to Philiphina, Malaysia
and Pakistan.
This paper is to study how LCGC economic effect to Indonesia and how its
business effect to brand owner of LCGC at global market?

Contents
1. History policy of National Car program and
Breaktrough Policy about LCGC
2. Business innovation of Car Maker
3. Economic Impact to Indonesia and Direct
Effect for Brand Owner to Global Market
4. Conclusions

1. History of National Car Program

End up at 1997,
followed financial
crisis and demise of
Soeharto regime

Based on government
policy (President
Instruction No. 2 /
1996)

Protested by other car

makers for unfair
policy

Appointed PT Timor
Putra Nasional to carry
on program

At first time, CBU in

Korea and imported to
Indonesia, sold at half
price of car market
price

Rebadging Korea
produced car - Kia
Sephia to Timor
brand

Definition of Public Policy

Public
Policy

"whatever the government do or not

do
(Dye ,1981)
a series of choices that are
interconnected created by agencies or
government officials in areas relating to
government functions, such as security
and defense, energy, healthcare,
education, public welfare, crime, urban
and others. (Dunn, 1994)
A system of courses of action, regulatory
measures, laws, and funding priorities
concerning a given topic promulgated by a
government entity or its representatives
(Kilpatrick, 2000)

Public policy has these characteristics:

Always have a specific purpose or a goaloriented action.
Contains action or pattern of actions of government
officials.
What actually done by the government.
Characteristically positive in the sense of an
action carried out and the only negative in the
sense that the decision was intended to not do
something.
The policy is based on regulation or legislation coercive

Stages of Making Public Policy

(Dunn, 1994)
1. Agenda Preparation
Policy agenda
should be based on
the degree of
urgency and the
essence of the
policy, as well as
stakeholder
involvement.

2. Policy Formulation
3.Policy Legitimation

Alternative Policy
phase to be selected
to give legitimacy
as the measures
on the basis of
taken to solve the
government
problem.
authorization.

4. Policy Evaluation
Evaluation
should be taken
in whole
process

Policy of LCGC as Breaktrough

Govt Rule about
Taxable of Luxurious
Category in form of
Motorized Vehicle as
Subject of Sales Tax
on Luxury Goods
The government will ask
the manufacturer to make
up about 40 % of local
components with the type
of components group to
be determined later. It will
be 80 % in 5 years.
For energy-efficient
cars and reasonably
priced, the Sales Tax
on Luxury Goods is
by 0 percent of the
sales price.

Development of Four
Wheel Motor Vehicles
that Energy Efficient
and Affordable
Prices or low cost
and green car
(LCGC). In additional
it must using
Indonesian brands,
models and logos
that reflect
Indonesia.

Why this Policy is a Breaktrough

Its protested by many Governors and
Mayor of Cities that worried the policy
will make more cars on street

Unsupported by House of
Representative members

Negative respond by transportation

experts and observers

It is still
continuing
and make
significant
progress
on car
technology
developme
nt and on
its sales

2. Business Innovation of Car Maker

Innovation according to the

Oslo Manual (2005) is "the
implementation of a product
(whether in the form of goods
and services), process,
marketing method or
organizational new method
improvised significantly".

Various international
institutions predicts that
Indonesia is likely as the
economic powerhouse of the
21st century. . In 2025
Indonesia is targeting a top 12
worlds economic strength with
GDP of 3.76 trillion dollars

In this innovation economy will

change the way we measures
economics progress and
increase productivity rests on
the power of human capital
with his mastery of science and
technology.

Economic growth must be

increased 5-6 % in 15 years
simultanously that only can be
done with innovation of
economy

Joseph Schumpeter (1942) : the

innovation economy era as an
era when science, technology,
entrepreneurship and
innovation become the main
driver of growth, not the
accumulation of capital, nor the
use of scarce resources as
defined in the classical
economic model.

First National Show of LCGC

# Toyota and Daihatsu case
First show of their vehicle Toyota Agya and Daihatsu
Ayla
at IIMS September 2012.
The Car is designed by local designer Mr. Mark Wijaya
, based on internal reaserch.
Indonesian people need Ground Clearence High cause
some infrastructure not good, floods and others.
Why will realease car without rule or protection from
Goverment ?
Rule LCGC PP no 41/th 2013 realease at 23 May 2013

 At the award event held MarkPlus Inc.,

Marketeers, and MarkPlus the Insight, Toyota
Agya & Daihatsu Ayla get awards in three
categories, New Wave Clarification Award
2012, New Wave Commercialization Award
2012, and New Wave Collaboration Award
2012
Innovation according to the Oslo Manual (2005) is
"the implementation of a product (whether in the
form of goods and services), process, marketing
method or organizational new method
improvised => Done by Toyota & Daihatsu

One Step Over The Competitor

Impact LCGC to Indonesia

Manufacturer
With 80% local contents rule,
Technolo
it make faster for transfer of
gy
technology in car making
Incentiv Tax will be 0% if all requirements
comply.
es

Investme Investment will

attract employee
nt

Low
prices

Car price will be

cheaper

Economic
Growth

Toyota
Daihatsu
Suzuki
Nissan
Total

INVESTME
NT
(MILLION
USS)
200
400
800
200
1600

Impact To Automotive Industry

2013

2014

2015

2016*

Sales

1.229.901

1.208.028

1.013.291

531.929

LCGC

4,2%

14,2%

16,3%

16,9%

95,8%

85,8%

83,7%

83,1%

Non LCGC

Increase
of car
market
Addition
on
revenue

Less cost
on tax
R&D
competi
ng

Conclusion