The Determinant Factors of Automobile Production in Indonesia

As the fourth populated country in world, Indonesia’s automobile production is seventhrank among producer developing countries. With capacity of more than2 million units, industry only produces less than 60% its capacity. To increase productionperformance, role Foreign Direct Investment (FDI) essential. However, previous empiricalstudies do not explain nexus between FDI and development Indonesian automobileindustry. Based on Ordinary Least Square (OLS) regression analysis, inward stock,domestic sales, imported components, exchange rate are significant determinants factors inautomobile production. The domestic demand primary pillar production.Since market seems to be saturated, export can an alternative toincrease Unfortunately, competitiveness isstill weak need improved because still producesEuro2 products depends highly raw material import for upstream industries.Therefore, transfer technology through mechanism required develop Indonesia’sautomobile competitiveness. This paper suggests that should used focusing Euro4standard upgrade local industries development.