Challenges of Indonesian Automotive Spare Parts Exports in the Global Market

Indonesia’s automotive industry is now growing rapidly and emerging as a major manufacturing force in Southeast Asia. It focuses not only on vehicle assembly but also on strengthening its position through the export of automotive spare parts. Domestically manufactured components have penetrated the global market, both as part of the OEM (Original Equipment Manufacturer) supply chain and the aftersales market (Replacement Equipment Manufacturer). The ASEAN region, Japan, and even the European and American markets are key destinations, demonstrating Indonesia’s growing competitiveness.

However, this significant opportunity for automotive spare parts exports also presents significant challenges. Price competition is intensifying, international quality and emission standards must be met, and logistical risks are crucial. Damage, total loss, or delays in the delivery of automotive spare parts have the potential to cause significant losses. This situation not only impacts financially but can also damage reputations and long-term business relationships with global partners.

Therefore, this article will discuss the Challenges Indonesian Automotive Spare Parts Exports In the global market, the risks during shipping, and the importance of cargo insurance, marine cargo insurance, and freight insurance. This protection is only effective if designed by an experienced insurance broker. Therefore, contact L&G Insurance Broker now on 08118507773 for free consultation before the risk comes.

The Contribution of the Automotive Spare Parts Industry to Indonesian Exports

Export Value Growth and Destinations

Export of Indonesian automotive spare parts makes a very significant contribution to the national economy, making it one of the mainstay non-oil and gas sectors. According to data from the Ministry of Industry, the export value of automotive components continues to show a positive trend, indicating an increase in the quality and competitiveness of local manufacturing. The main export destinations are now expanding, not only to ASEAN countries (such as Thailand and Malaysia, which are also automotive hubs), but also to markets with high-quality demands such as Japan, the United States, and the European Union.

Critical Role in Global Supply Chains

This industry not only supports the country’s foreign exchange, but is also an integral part of the global supply chain (GVC).Automotive spare parts made in Indonesia, ranging from electrical components, braking systems, to…engine parts, used by various international brands for new vehicle production needs (OEM) and as spare partsaftersalesThis fact proves that local products are capable and required to meet stringent global quality standards. However, this significant contribution could be hampered if Indonesia faces challenges in exporting automotive spare parts in the global market.issues related to logistics, trade barriers, and shipping risks are not managed professionally. Therefore,freight insurance is an absolute necessity.

Challenges of Indonesian Automotive Spare Parts Exports in the Global Market

Indonesian automotive component exporters face pressures on various fronts, from price competition to shipping complexity.

A. Global Price and Quality Competition

The most obvious challenge facing Indonesian automotive spare part exports in the global market is intense competition with other major manufacturing countries. Indonesia must compete with manufacturing giants like China, which boasts large-scale production, as well as regional rivals like Thailand and Vietnam. Competition revolves not only around competitive pricing but also on quality (meeting very tight technical tolerances) and logistical efficiency (speed of automotive spare part delivery).Competing countries often have more mature logistics and infrastructure networks, requiring Indonesia to continue strengthening its overall competitiveness.

B. Regulatory Barriers and Strict International Standards

Exported components, particularly those related to safety (such as brakes or airbags) or the environment (emission systems), must meet a series of safety, environmental, and technical certification standards set by the destination country. If goods do not comply with local regulations, they may be rejected or returned (return shipment), resulting in huge additional costs, fines, and potential loss of contracts. Ensure that every Automotive parts have ISO, IATF 16949, or E-mark certification as part of efforts to Manage the Challenges of Indonesian Automotive Spare Part Exports in the Global Market.

C. High Logistics and Transportation Risks

This is the most threatening riskcash flowSpare part exports involve a multimodal transportation chain (land, sea, and air). Goods are susceptible to damage, loss, or delays in reaching their destination due to various unforeseen factors: 

• Natural Factors: Bad weather, storms, high waves at sea.
• Operational Factors: Shipwrecks, collisions, fires in containers, or loading errors.
• Cargo Factor:  Spare parts automotive sensitive like ECU (Electronic Control Unit) or precision components are susceptible to shock, moisture, or rust.

Without proper financial protection, losses due toThe cost of failed automotive spare part exports can reach billions of rupiah. Therefore, cargo insurance and marine cargo insurance are essential.be the back bone minimize losses.

D. Geopolitics and Global Economic Fluctuations

Global uncertainties such as trade wars, geopolitical conflicts (which affect shipping routes), and currency fluctuations are also inhibiting factors. Geopolitical instability can trigger significant shipping delays and increase distribution costs, adding to the Challenges of Indonesian Automotive Spare Parts Exports in the Global Market from the operational cost side.

Managing Risk in Shipping Automotive Spare Parts

Automotive spare parts exports face various challenges, physical and financial while in a container, ship, or transit warehouse.

A. Physical Risks and Cargo Damage

Automotive spare parts can experience: 

1. Mechanical Damage: Shocks that cause parts to break or bend, especially in components, body parts or glass.
2. Rust or Corrosion: High humidity during long sea voyages can cause rust on steel or iron components, damaging the quality of the goods.
3. Theft (Pilferage): High-value goods are vulnerable to theft during transit at ports or warehouses.

B. External Risks and Marine Disasters

This is the most devastating risk, where losses can reach total loss(total loss). External risks include: 

• A major storm or high waves caused the container to fall into the sea.
• Fire on board or collision between ships.
• General Average (GA):  If the ship experiences a disaster and the captain decides to throw away some of the cargo to save the ship, all cargo owners (even survivors) are required to share the losses. Marine cargo insurance is very important to protect exporters from liabilityGeneral Average This.

C. Administrative Risks and Delays

Document error (customs clearance), negligence of port operators, or detention of goods by customs can cause delays of months. These delays result in contractual penalties withbuyerinternational.

A real case occurred when the deliveryAutomotive spare parts destined for Europe were damaged when containers were submerged in seawater during a storm. The company suffered losses totaling millions of dollars and disrupting trade relations. The company has marine cargo insurance with coverageAll Riskscan immediately file a claim, so that financial losses can be reduced by the police.

Financial Protection Solutions:  Cargo and Marine Cargo Insurance

A. Cargo Insurance:  Ultimate Protection from Factory to Warehouse

Cargo insurance provides protection against the risk of damage or loss of goods during shipping. For automotive spare parts exporters, this policy is crucial, as the value of shipped goods can reach billions of rupiah per container.

This protection covers the risks of physical damage, theft, loss, and delays resulting from insured risks. With cargo insurance, exporters need not worry about significant losses that could erode business capital and minimize the risk of shipping.againstcash flow company.

B. Marine Cargo Insurance:  Focus on Sea Routes

More specifically,Marine cargo insurance provides coverage for goods shipped by sea. Considering that over 80% of Indonesian automotive spare part exports are carried by ship, this policy is the most relevant option.

Marine Cargo Insurance is usually divided based on the clauses used (referring to theInstitute Cargo Clauses – ICC): 

1. ICC (A) – All Risk: The broadest policy, covering almost all risks of damage or loss except those specifically excluded (such as war,delay, or inherent damage to the goods). This is the best option for automotive spare parts.
2. ICC (C) – Named Perils Limited: Only covers certain risks such as fire, ship collision, sinking, or General Average.

With marine cargo insurance coverageAll Risk, delivery of automotive spare parts from factories in Indonesia to buyer’s warehouses abroad to get comprehensive protection, overcoming the Challenges of Indonesian Automotive Spare Part Exports in the Global Market.

C. Domestic Freight Insurance

Besides cargo insurance for export, exporters also need cargo insurance for the initial logistics stage. This policy covers all stages of the journey, including local distribution from factories in industrial areas (e.g., Karawang or Cikarang) to the export port (e.g., Tanjung Priok or Tanjung Perak). This coverage is important because the risk of accidents on land is also high and can lead to initial losses before the goods even board the ship.

Financial Protection Case Studies and Recommendations

Real Case Study of Export Losses

Several automotive companies in Indonesia have experienced major losses due to shipping automotive spare parts that are damaged during sea travel. For example, an exporter experiences problems when shock absorbers that were shipped were damaged due to high humidity in the container during transit, causing buyers in Europe, the cargo. The resulting losses reached USD 3 million (including return shipping costs and contractual penalties) and led to legal issues.

Companies with marine cargo insurance (ICC A) can minimize losses. Claims paid by the policy allow exporters to ship their goods promptly.buy replacement cargo and continue the next contract without losing reputation in the eyes ofbuyerinternational.

Comprehensive Insurance Recommendations

To faceChallenges of Indonesian Automotive Spare Parts Exports in the Global Market,Exporters should have a multi-layered protection package: 

1. Marine Cargo Insurance (ICC A): Primary protection for sea and air shipments, recommendedAll Risk for automotive spare parts/expensive.
2. Domestic Freight Insurance: Protecting shipments from factory to port.
3. Trade Credit Insurance:  A very important additional protection from risk buyer default (default), which is a non-cargo financial risk.

The Strategic Role of Insurance Brokers in Automotive Spare Part Exports

Choosing the right policy coverage in dealing withExporting Indonesian automotive spare parts to the global market is no easy feat. This is where insurance brokers play a vital role as risk advisors.

Insurance brokers act as consultants who help exporters choose the best policy for their specific cargo needs.automotive spare parts exports,The role of a broker includes: 

• Cargo and Route Analysis:  Analyze types of automotive spare parts shipped (electronic, mechanical, heavy) and the specific risks of the shipping route to the destination country.
• Cargo Insurance Program Design: Designing the programcargo insurance and marine cargo insurance which not only protects against physical losses, but also protects against risks such asGeneral Average.
• Negotiation Clause: Negotiate with the insurance company to get the best clauses, including minimal exclusions and sufficient limits.
• Claim Assistance: When a loss occurs, the broker advocates for exporters, ensuring the claims process (including complex documentation) is expedited and compensation is paid in full, so that the company can quickly resume operations and maintain a contribution of the automotive industry there are national exports.

L&G Insurance Broker has extensive experience assisting numerous automotive companies in navigating complex export risks. With broker support, exporters gain confidence and protection when entering the high-risk global market.

Conclusion

The challenges facing Indonesian automotive spare parts exports in the global market cannot be underestimated. Fierce competition, logistical risks, and global uncertainty pose real threats to the sustainability of export businesses. However, with the right strategy and solid financial safeguards, exporters can significantly minimize losses.

The combination of marine cargo insurance (ICC A) and freight insurance is the main bulwark that protectscashflowfrom physical cargo loss. The role of an insurance broker is crucial in designing comprehensive protection, from policy selection to claims assistance. Don’t let your business stall due to anticipated risks. Protect your spare parts exports with the right steps.

Source: 

• https: //ligaasuransi.com/masa-depan-industri-otomotif-tren-inovasi-dan-tantangan-global/ 
• https: //ligaasuransi.com/cara-menghitung-biaya-premi-asuransi-marine-cargo-untuk-komoditas-ekspor/ 

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