JAKARTA, Sept 13 (Reuters) - Toyota Motor Corp said it will invest 2.9 trillion rupiah ($337 million) in Indonesia, building a new factory and rolling out a new model, in its second move this year to expand in the fast-growing car market.
Toyota joins a long list of automakers that have announced plans this year to invest or expand to tap surging demand in the world's fourth-most populous country, including General Motors Co , Nissan Motor Co and Toyota subsidiary Daihatsu Motor Co .
The factory will produce a new model along with the Kijang Innova minivan, taking Toyota's total capacity in Indonesia to 180,000 units by early 2013, the world's biggest automaker said on Tuesday.
Toyota executives were tight-lipped about what the new vehicle would look like, but said a compact "city car" was among the options.
"We also need low-cost cars like a small city car or hatchback," said Johnny Darmawan Danusasmita, president of Toyota-Astra Motor, the local joint venture.
The new factory, Toyota's second in Indonesia, will be built next to the existing Karawang plant in North Jakarta.
Indonesia's car market grew by a staggering 58 percent last year to a record 765,000 vehicles and is widely expected to top 1 million in the next few years.
While such growth is impressive, fuelled by an economy seen expanding by 6.6 percent this year, Indonesia's auto sales are still some way short of other Asian emerging markets giants. China is now the world's biggest auto market, with 13.8 million vehicles sold last year, while India sales rose 30 percent to a record 1.98 million.
Toyota made the announcement at a news conference, attended by President Akio Toyoda, to celebrate its 40th anniversary in Indonesia.
"I am confident that the announcement of this second factory will be seen as proof of Toyota's commitment to the Indonesian market," Toyoda said, entering the ballroom in a Jakarta hotel in an orange Kijang pickup truck, developed in 1977 at the request of the Indonesian government.
Toyota dominates the Indonesian market, cementing its pole position in 1977 with the launch of the Kijang truck, priced at a third of a Corolla sedan.
Toyota took a 38 percent share of the Indonesian market last year, with retail sales of 281,000 vehicles, and expects that to grow to around 300,000 this year.
"Dark clouds have overshadowed the recent economic landscape in Japan and in the West, but Indonesia is bright and vibrant," Toyoda said.
The Indonesian market is dominated by multi-purpose vehicles (MPVs) such as the Kijang Innova and Avanza, but the government is keen to create a market for smaller city cars and is expected to outline specifications and other requirements to receive subsidies to produce them in the country in the coming months.
The prospect of growing demand promises more intense competition in the market, where Japanese brands control all but 5 percent of the market.
Last week, China's Geely Automobile Holdings Ltd said it planned to set up a factory in Indonesia by 2015 with an initial capacity of 10,000 vehicles per year and start-up investment of $20 million as it seeks to win market share.
More than half of Toyota's vehicles so far are produced by Daihatsu, with which Toyota co-developed the best-selling Avanza, sold as Xenia under Daihatsu's badge. Daihatsu also builds Toyota's Rush model under an original equipment manufacturing deal. ($1 = 8600.000 Indonesian Rupiahs) (Editing by Muralikumar Anantharaman and Lincoln Feast)