Japan’s Premium Group creating used-car warranty market in Indonesia

21, Aug. 2019

Wataru Ota, director of PT Premium Garansi Indonesia, a joint venture established by Japanese auto loan and used-car warranty provider Premium Group Co. and three other Japanese and Indonesian partners, shown in a photo taken on May 27, 2019.
Wataru Ota, director of PT Premium Garansi Indonesia, a joint venture established by Japanese auto loan and used-car warranty provider Premium Group Co. and three other Japanese and Indonesian partners, shown in a photo taken on May 27, 2019.

By Makiko Yamamoto

JAKARTA, NNA – Japanese auto loan and used-car warranty provider Premium Group Co. is tapping Indonesia’s underdeveloped automotive warranty market, aiming to create a sense of security in quality and alleviate the risk of mechanical defects for second-hand vehicle purchasers.

“A warranty scheme for used cars had not existed in Indonesia. We are the first individual warranty provider here,” said Wataru Ota, director of PT Premium Garansi Indonesia, its local joint venture.

The local unit, established in November 2017, has offered an uncommon used car warranty service in Southeast Asia’s largest automotive and motorcycle markets, although non-life insurers sell such assurance products as an optional service of normal car insurance, Ota said.

Premium Group picked Indonesia following an entry into its first overseas market of Thailand as Japanese auto brands hugely dominate the markets in the two nations. The local unit is initially offering quality guarantees for Japanese brands -- Toyota, Daihatsu, Honda, Mitsubishi, Suzuki and Nissan.

In Indonesia, the Tokyo-listed company, which has seen robust sales growth at home since its establishment in 2007, has teamed up with PT Summit Auto Group, a wholly owned unit of major Japanese trading house Sumitomo Corp., and sheet metal painting firm PT Jakarta Teknologi Utama under local conglomerate Sinar Mas Group.

In a bid to integrate their expertise and utilize operational advantages in local networks, the three firms each own a 33 percent stake in Premium Garansi, while used-motorcycle auction operator Japan Bike Auction Co. holds the remaining 1 percent.

The Japanese-Indonesian joint venture offers warranty products at prices ranging from about 1 million to 7 million rupiah ($70 to $491) via second-hand vehicle dealerships, which promote such guarantees to purchasers on behalf of Premium Garansi, Ota said in an interview with NNA in late May.

The number of such dealership outlets, including small shops, is estimated at some 2,000 in the greater Jakarta region. Through the customer bases of PT Oto Multiartha, Sumitomo’s auto financing affiliate, Premium Garansi has promoted the warranty service to dealerships there, he added.

The venture initially marketed a standard type of product covering malfunctions for passenger cars at compensation costs in a range of 30 million to 50 million rupiah with a one-year guarantee, as it aims to first raise awareness of the service among locals through a simple coverage.

The warranty is available for Japanese brand cars with engines up to 3000 cc, with total mileage of 150,000 kilometers and seven years since rollout, according to Ota.

It later launched specialized products that cover impairment only in engines or transmissions at lower prices to meet a wide variety of demand, which can cover for engine repair costs normally between 20 million to 35 million rupiah. Over 200 core components, such as brakes, steering and electrical equipment, are covered by the warranty, he said.

Some sales outlets include a warranty service fee into their car prices. “Sales outlets welcome the warranty service as they can get rid of the risk of complaints (from consumers),” Ota said.

Premium Garansi can use two service garages in the greater Jakarta area run by Jakarta Teknologi Utama, in addition to its 23 affiliated maintenance factories, which are not under automakers’ control, he said.

In Indonesia, people are still not familiar with the concept of used-car warranty, said Ota. “We hand out promotional materials to help dealership outlet workers understand the scheme.”

The number of second-hand vehicle shops that have agreed with the warranty provider to offer the service has totaled 200 in the capital region.