Korea’s largest automaker, Hyundai Motor Group, plans to set up a plant in Indonesia to increase its presence in the ASEAN market, investing $1.55 billion into it, the company said on Tuesday.
The new plant will boost the carmaker’s market share in the Southeast Asian countries and competing more effectively with Japanese rivals. Presently, Japan’s automakers dominate the region’s car market for years.
Hyundai’s Executive Vice Chairman Chung Euisun and Indonesian President Joko Widodo signed a memorandum of understanding during a ceremony held at a Hyundai Motor plant in Ulsan. The MOU discusses building a plant to be located in Deltamas industrial town in the city of Bekasi capable of assembling 250,000 vehicles in a year.
Hyundai Motor plans to invest $1.55 billion by 2030 to construct the plant, which will cover 777,000 square meters of land in the industrial town. Construction will start by next month and is expected to finish by the end of 2021, beginning commercial operation. Initial capacity will be 150,000 units a year and will later increase to 250,000 vehicles.
The car manufacturer stated it plans to launch a new small multi-purpose vehicle, an electric vehicle, and a small SUV that would be a fit for the ASEAN market.
“The plant is an achievement based on the full support and cooperation from the Indonesian government,” Chung said during the ceremony. “Hyundai Motor will fully correspond to the Indonesian government’s policy on eco-friendly cars and contribute to the growth of the ASEAN economy.”
Car tariffs for members of the ASEAN nations range from 5 percent to 80 percent with other additional types of non-tariff barriers. Hyundai said that the plant is a “must” since the government gives tax waivers to cars having more than 40 percent of their parts localized. Adhering to local trade policies will help partnerships between ASEAN and Korean auto parts suppliers.
The company will ship the manufactured vehicles from the Indonesian plant to the Philippines, Vietnam, Thailand, and other countries in the region. The group also said that it would also tap into the Australian and Middle Eastern markets. The plant will likewise assemble pre-manufactured Hyundai vehicle modules, called complete knock-downs, to have up to 59,000 a year for exports.
Indonesia is currently the most prominent automotive market in the ASEAN region, selling 1.15 million vehicle units last year. The country’s 270 million population and 5 percent economic growth also attract carmakers.
Hyundai Motor announced that by 2021, it would set up a network of dealers comprising of more than 100 agencies in Indonesia to boost sales.
The group seeks to create a collaboration with its Vietnamese joint venture, the Hyundai Thanh Cong Manufacturing Vietnam, with the new manufacturing plant. The venture plans to increase the output to 100,000 by 2020 from its current assembly of more than 60,000 complete knock-down vehicles.
From January to October this year, the joint venture sold 63,210 vehicle units, an increase of 23.83 percent from a year earlier. The popularity of Accent led to the surge of sales, and during the same period, the largest brand in Vietnam, Toyota, sold 64,021 vehicles.
