Study of :

CONDITION AND PROSPECT OF TIRE INDUSTRY IN INDONESIA, 2011

(Amid the boost of rubber raw material price)
March, 2011

Rapid growth has been recorded in Indonesia’s tire industry over the past several years
partly attributable to fast growing automotive industry. The tire industry suffered a setback in
2009, but in 2010, it recovered quickly marked with a sharp increase in production and sales. The
country’s production of car tires surged 28.8%, motorcycle tires shot up by 43.2% compared with
in 2009. Sales of tires in replacement market grew 23.8%, sales in original equipment/OE market
(car factories) climbed by 54.4%, and exports rose by 25.4%.

The country’s economic growth could be made as reference for the market prospects of tires
in the country in the coming years. In 2005, the country’s tire production rose 16%, when the
country’s economy expanded 7.2%. In 2010, tire production surged 33.7% when the economy grew
5.8%. A prediction of the International Monetary Fund (IMF) sets the country’s economic growth
at 6.2% for 2011 with the world’s car production forecast to grow 8.9% to 64 million units. Based on
the predictions, the country’s production of tire is expected to grow faster to follow the growth of
car and motorcycle industries in the country and in the world.

PT Bridgestone Tire Indonesia produced 13.9 million units of tires in 2010 or around 27.6% of
the country’s total production of 50.4 million units. Sales of tires on the domestic market reached
5.6 million units. In 2011, Bridgestone sets to expand its production capacity by 10% to 14.4 million
unit a year. The expansion of the production capacity is to keep pace with growing demand from
fast growing automotive industry and from export markets in Southeast Asia, Oceania, Middle
East and Africa.

In the same year PT Gajah Tunggal Tbk produced 13.7 million units of car tires with
domestic sales at 5.1 million units and exports at 9.9 million units. Gajah Tunggal, which has a car
tire production capacity of 24.3 million units also plans to expand its capacity for radial tires from
30,000 units to 45,000 units per day in 2012. Its production capacity for motorcycle tires is also to be
expanded from 37,000 to 105,000 units per day. The company has built new factory in Tangerang,
Banten, but the company’s capacity utilization is only 80% not yet up to expectation because of
delay in the procurement of new machines as a result of the global financial crisis. PT Gajah
Tunggal has established cooperation with the France-based tire maker Michelin to produce 5
million units of radial tires a year.

Meanwhile, the prices of natural rubber has shot up to US$4 per kg in international market
or the highest since the World War II. The surge in price followed growing demand amid
shrinking supplies and soaring price of oil, the basic material for synthetic rubber. Demands have
increased mainly from China, and the United States. At the same time supplies from the world’s
largest producers including Thailand and Malaysia declined on weather anomaly. According to
the Meteorology, Climatology and Geophysics Agency (BMKG), rain falls in some production
centers had been too high affecting production until April 2011.

The International Rubber Study Group (IRSG) predicted that the world’s and for natural
rubber in 2011 reached 11.15 million tons as against production of 10.97 million ton - or a deficit of
181,000 tons. In 2010, deficit in the world market supply reached 446,000 tons.

The rubber price on the domestic market followed the prevailing prices in international
market. The price in the Tokyo commodity market has jumped from one record to a new record
following the US economic recovery. Based on Bloomberg’s data, the price of rubber in the Tokyo
Commodity Exchange was set at 380.40 yens per kg for January 2011 delivery. The increase in the

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rubber price had been triggered by heavy rains in rubber producing countries causing production
fall while demand is growing mainly from India and China.

This study report presents details about natural rubber basic material price developments,
production and requirement in the world as well as on the domestic market. Also included in this
report are condition of domestic motor vehicle industries, car production and sales, tire production
and sales including sales in the replacement market and OE market (car factories) and exports,
and details about supporting industries and imports of additives like carbon black, bed wires and
related industries. PT Chandra Asri is reported planning to build the country’s first butadiene
factory. This study report also presents a regulation of the Finance Minister No. 48/MK.011/2010
on import duties on tire cord, and road map on rubber processing and rubber goods industries in
the country.

We hope this report would be useful for decision makers in various business areas especially
in tire industry as well as in related industries including banking sector. This report would provide
references for new investors and help them make right decisions before embarking on expensive
projects.

The report of this study is written in about 450 pages with the price of Rp 6,000,000 per copy
for the Indonesian version, and US$800 per copy for the English version, with negotiable exchange
rate. For order and further information about this study, please contact PT Mediadata Riset
Indonesia through phone number : (021) 809-6071, 809-3140, or facsimile number 021-809 6071 by
filling the attached form. For overseas or outside Jakarta order, delivery fee would be added.
Thank you for your kind attention.

Jakarta, March 2011

PT Media Data Riset

Drh. H. Daddy Kusdriana, M.Si

President Director

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 LIST OF CONTENTS
CONDITION AND PROSPECT OF TIRE INDUSTRY IN INDONESIA, 2011
(Amid the boost of rubber raw material price)
March, 2011
1. INTRODUCTION
2. POPULATION AND GENERAL
DESCRIPTION OF INDONESIAN
ECONOMY
2.1. Indonesian Population
2.1.1. Indonesian population growth
2.1.2. Population growth by provinces
2.1.3. Population by age groups
2.1.4.Projection of Indonesia’s Population
Growth
2.2. General description of Indonesia’s
economy
2.2.1. Economic growth
2.2.2. Economic Growth in 2010
2.2.3. Prospects of Indonesia’s economic
stability
2.2.4. Economy Grows 6.2% in Q2
2.2.5. Inflation rate
2.2.6. Inflationary pressures in 2011
2.2.7. TDL increase more than 15%
2.2.8. Indonesian per capita income
2.2.9. Rupiah exchange rate
2.2.10. Foreign exchange reserves
2.3. Current Account
2.4. Law on 2011 state budget approved
2.5. Deficit target missed
3. BASIC MATERIALS
3.1. Natural rubber
3.2. Plantation areas
3.2.1. Replanting to increase
productivity
3.2.2. Smallholders’ plantations
dominant
3.2.3. Lowest productivity
3.2.4. Hurdles in development
3.3. Production grows 3.3% per year
3.3.1. Set to be the world’s largest
producer
3.3.2. World’s Rubber Production Down
3.4. Rubber Prices Surging
3.4.1. Price expected to remain high until
April, 2011
3.4.2. Price of processed rubber surges
3.4.3. ITRC creating seller market
3.4.4. Causing difficulties for users
3.5. Domestic Consumption
3.5.1. Tire industry largest consumer of
rubber
3.5.2. World’s consumption
3.6. Crumb Rubber Industry
3.6.1. Crumb Rubber Basic Material
3.6.2. Quality of Crumb Rubber
3.6.2.1. Volatile Matter (Vm) Too
High
3.6.2.2. Low PO
3.6.2.3. Low PRI
3.6.2.4. High content of ashes
3.6.2.5. High content of dirt
3.7. Early detection of contamination
3.7.1. Early sorting
3.7.2. Ultrasonic method of detection
3.7.3. Chemical Method of Detection
3.8. Types of Crumb Rubber
3.9. Distribution and Trade Regulations
3.10. Regulation on Rubber Quality
3.11. Crumb Rubber Quality Requirement
3.12. Roadmap
3.12.1. Policy in Development of
Rubber Industry
3.12.2. Mid term action plan
3.12.3. Long term Targets (2010-2025)
3.12.4. Strategies and Policies
4. MOTORCYCLE VEHICLE INDUSTRY
4.1. Backgrounds
4.1.1. Automotive industry
4.1.2. Structure of Motorcycle Vehicle
Industry
4.1.3. Brand Holding Sole Agent
(ATPM)
4.1.4. Number of registered vehicles
4.2. Production capacity
4.2.1. Production up 51.1%
4.2.1.1. Production by categories
4.2.1.2. Production by brands
4.2.1.3. Producing small cars
4.2.1.4. Import duty on car in IKD
form
4.2.1.5. Local contents
4.3. Investment
4.4. Sales
4.4.1. Breaking record
4.4.2. Domestic car sales predicted to
reach 800,000 units
4.4.3. Sales by brands
4.4.4. Car sales by Categories
4.4.5. Astra dominates 56% of car market
4.4.6. Ten largest models in market share
4.5. Asean domestic market
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 4.6. BBM Policy
4.7. Prices ready to rise
4.8. Being calculated
4.9. Motorcycle Industry
4.9.1. Production capacity
4.9.2. Production increases
4.9.3. Honda’s Production 4 Million
Units
4.10. Sales hit a record high at 7.39 million
units
4.10.1. Honda market leader
4.10.2. Market of under bone motorcycles
4.10.3. Market of scooters
4.10.4. Sports type motorcycles
4.11. Aggressive in launching new products
4.11.1. Stop producing types with engine
capacity of 100 cc
4.11.2. Market share of automatic
scooters
4.11.3. Honda Beat in new appearance
4.11.4. Prices of under bone motorcycles
4.11.5. Yamaha sporty with high speed
4.12. Exports of Motorcycles
4.13. Sales turnover
4.14. Competition sharper in the market of
sport motorcycles
5. INDONESIA’S TIRE INDUSTRY
5.1. Indonesia’s tire industry
5.1.1. Growing strongly
5.2. Factory and Capacity
5.2.1. Bridgestone Tire Indonesia
5.2.2. PT Gajah Tunggal Tbk
5.2.3. PT Goodyear Indonesia Tbk
5.2.4. PT Multistrada Arah Sarana Tbk
(MAS)
5.3. Increased Production
5.3.1. Production of Car Tires up 28.8%
5.3.2. Tire Production by Companies
5.4. Tire Production By Categories
5.4.1. Registration of New Pattern
5.4.2. Amendment to SNI of light and
large trucks and bus tires
5.4.3. Proposed Revisions of SNI from
UNECE and ETRMA
5.4.4. SNI Revision
5.5. Tire market following car market trend
5.5.1. The United States offers import
duty exemption on Indonesian
tires until 2013
5.6. Replacement tires
5.7. Gajah Tunggal posts sharp increase in
profit
5.8. Motorcycle Tires
5.8.1. Production up 43.2%
5.8.2. PT Gajah Tunggal, the largest
producer
5.8.3. Registration of Wheels Tire
Patterns
5.9. Production of inner tubes
5.10. Prices up
5.11. Domination of the IRC motorcycle
tires
5.12. Distribution and Promotion
5.13. Tire Industry Needs Support
6. DOMESTIC SALES AND EXPORTS OF
TIRES
6.1. Car tires
6.1.1. Boosting domestic sales
6.1.2. All time record
6.1.3. Domestic Market
6.1.3.1. Sales growing 10.2%
6.1.3.2. PCR tires
6.1.3.3. BIAS tires
6.1.4. Bridgestone the best seller
6.1.5. Export market
6.1.6. Sales value
6.2. Motorcycle tires
6.2.1. Sales by companies
6.2.2. Motorcycle tires automatic scooter
6.3. Tax payments up 71.8%
7. EXPORTS – IMPORTS
7.1. Export market wide open
7.2. Tire exports up 4.8% on the average
7.2.1. Exports of car tires surging
7.2.2. Exports by types
7.2.3. Sumi Rubber leads
7.3. Ban Motorcycles
7.3.1. Exports up by 25% on the average
7.3.2. Two exporters
7.4. Dumping charges
7.5. Imports
7.5.1. China largest supplier
7.5.2. Transshipment of imported
products
8. INVESTMENT
8.1. Global Tire Industrialists Eyeing Indonesia
8.1.1. Hankook building tire factory
8.1.2. Czech investor to build US$1.2
billion tire factory
8.1.3. Slovakia studying plan to build tire
factory
8.1.4. JK Tyre eyeing Mega Rubber
8.1.5. Three Dubai based companies ready
to invest in tire industry
8.1.6. Car tire industry needs more
investment
8.2. More mergers and acquisitions expected
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 8.3. Investment in basic material production
8.3.1. Butadiene to be produced locally
8.3.2. Strengthen Industry
8.4. Japan largest supplier of bead wire
8.5. Illegal products of tire
8.5.1. Illegal products of tire 2 million
units
8.6. Jobs in tire industry
9. CHALLENGES AND CONCLUSION
9.1. Abolition of 10% VAT on Rubber
Purchases
9.2. Change in HS number for tire imports
having SNI
9.3. Tire Moulds Linked to Optical Disc
Machines in imports
9.4. Requirement to use label in Indonesian
language
9.5. APIT and APIU
9.6. Conclusion
10. PROFILE OF COMPANIES
10.1. PT Gajah Tunggal Tbk
10.1.1. History
10.1.2. Financial Performance Improves
10.1.3. Shareholders
10.2. PT Multistrada Arah Sarana Tbk
10.2.1. Appreciation
10.2.2. Raising selling prices
10.2.3. Selection of financial advisor
10.2.4. Sales commitment
10.2.5. Income in 2011 predicted to
reach Rp3.2 Trillion
10.3. PT Goodyear Indonesia Tbk
10.3.1. Goodyear plans more investment
10.4. PT Bridgestone Tire Indonesia
10.4.1. History
10.4.2. Technology
10.4.3. Marketing networks
10.4.4. Production
10.4.5. ISO certificate
10.4.8. Expanding capacity 10%
10.5. PT Sumi Rubber Indonesia
10.5.1. History
10.5.2. Superior endurance contests
10.5.4. Dunlop in Indonesia
11. ROAD MAP OF RUBBER AND RUBBER
GOODS PROCESSING INDUSTRY, 2009
11.1. Introduction
11.2. Classification of Rubber and Rubber
Goods Industries
11.2.1. Upstream Industries
***
11.2.2. Intermediate Industries (semi
finished)
11.2.3. Downstream Industries
11.3. Trend of Rubber and Rubber Goods
Industries
11.3.1. Present trend
11.3.2. Trend in the future
11.3.3. Analysis of the trends
11.4. Hurdles faced by rubber and rubber
goods industries
11.4.1. Natural rubber (On Farm)
11.4.2. Rubber products (Off Farm)
11.5. Factors of competitiveness
11.5.1. World/Regional and Domestic
11.5.2. Rubber goods Industry
11.5.3. Domestic Basic Materials
11.5.3.1. Rubber goods market
11.5.3.2. Gap analysis
11.5.3.3. Market behavior
11.5.3.4. Condition factor (Input)
11.5.4. Capital resources
11.5.5. Human resources
11.6. Core, Supporting and Related Industries
11.6.1. Core industries
11.6.2. Supporting industries
11.6.3. Related Industries
11.7. Strategies of business leaders and
companies
11.8. SWOT Analysis
11.8.1. Support
11.8.2. Weaknesses
11.8.3. Opportunities
11.8.4. Challenges
11.9. Suggestions
11.9.1. Mid term target (2010-2014)
11.9.2. Long term target (2010-2025)
11.10. Strategy and policy
11.10.1. Vision and direction
11.10.2. Indicators
11.11. Performance of rubber goods industry
11.12. Hand Gloves Industry
11.13. Phases of implementation
11.14. Programs and Plans of Action
11.14.1. Mid term targets (Year 2010-
2014)
11.14.2. Long term targets (Year 2010-
2025)
11.15. Agencies
APPENDIX
DIRECTORY
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Study of :
CONDITION AND PROSPECT OF TIRE INDUSTRY IN INDONESIA, 2011
(Amid the boost of rubber raw material price)
March, 2011

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