Honda (
HMC
,
quote
) is joining numerous foreign automakers with its
plans to build a new assembly plant
to boost local production of its most popular models in Indonesia,
Southeast Asia's second-largest car market after Thailand.
[caption id="attachment_63123" align="alignright" width="300"
caption="Busway traffic in Jakarta, Indonesia"]
[/caption]
Last week Honda Prospect Motor, the Japanese auto manufacturer's
distributor and assembler in Indonesia, began construction on a
$329 million factory in Karawang, West Java. The factory, which
Honda hopes will boost its local production threefold to 180,000
vehicles annually, is the company's second manufacturing plant in
the archipelago.
The plant will produce models such as the Honda Jazz four-door
compact hatchback, CR-V compact sports-utility vehicle and Freed
multi-purpose vehicle. Additionally, however, Honda aims to start
producing models that it imports for the time being, such as the
Brio, another hatchback model.
"The plan is that it will produce new models such as the Honda
Brio," said Honda chief executive officer Takanobu Ito, according
to the
Jakarta Globe
.
A record 894,180 vehicles were sold in the Indonesian car market
in 2011, a 17% increase over a year earlier, according to the
Association of Indonesian Automotive Industries (Gaikindo). While
growth is projected to slip to 5% this year, Indonesia looks set to
overtake Thailand as the region's top car market.
"With the automotive market growing and conducive economic
conditions, this country holds big potential for the automotive
industry," Ito said to the
Jakarta Globe
.
Because auto production requires a lot of capital and is labor
intensive, Indonesia's low costs make local production especially
appealing to foreign companies.
Consequently, Toyota (
TM
,
quote
) has also said
it will invest $143 million
to build a new factory to boost local output by 60%. Suzuki (
SZKMF
,
quote
) has even grander plans. It announced it would invest $700 million
to construct a new engine plant that will also expand its
production in Indonesia.
General Motors (
GM
,
quote
), BMW, and Tata (
TTM
,
quote
) are likewise making plans to make inroads in the Indonesian car
market.
