Thu, 10 Mar 2005

Two Indian auto companies to invest in Indonesia

The Jakarta Post Jakarta

Seeing potential in Indonesia's automotive market, two Indian companies -- Bajaj Auto Ltd. and TVS Motor Co. -- plan to set up manufacturing and assembly plants in the country next year.

Bajaj Auto, the world's largest three-wheeler manufacturer, plans to develop a three-wheeler assembly plant that will eventually be expanded into a sports motorcycle manufacturing plant, said the company's chief representative, Dharmesh Banerji, on the sidelines of the Indian engineering expo Indiatech 2005.

"We are going to invest in several phases. The initial one will be some US$10 million in the form of a leased plant and capital machinery," he said, adding that the fixed location had yet to be decided.

In its homeland, Bajaj Auto is the largest two-wheeler and three-wheeler exporter with total sales of more than 1.5 million units worth $1 billion. The company exports its products to over 50 countries, with Sri Lanka, Bangladesh, Colombia and Mexico being its top clients.

Bajaj Auto will work with its local distributor, PT Abdi Raharja, in setting up the plant and distributing the vehicles to be used as public transportation all over Indonesia.

"We see Indonesia as our gateway to Asian countries," said Banerji, adding that the final phase of the investment here would be aimed at producing motorcycles to be exported to the Asian market.

"We are going to study the market, develop the suitable model and manufacture it here," he said, pointing out that the quality of the company's motorcycles was slightly below those of Japanese products but their prices would be 20 percent to 25 percent lower.

The overall investment will be completed in five years, with the company to break even on the first $10 million investment within two years.

"We hope to share the Indonesian motorcycle market by 10 percent to 15 percent when all phases of our project here are completed," Banerji said. "What we currently have is a niche market with the three-wheeler as a complementary transportation means to the existing public minivans and buses."

With the future assembly plant, Bajaj Auto and PT Abdi Raharja plan to distribute new gasoline-fueled bajaj to Manado in North Sulawesi; Makassar, South Sulawesi; Lampung; Semarang, Central Java; and Surabaya, East Java, said PT Abdi Raharja marketing manager Budi Dirgantoro.

"We have distributed 100 bajaj as a new means of public transportation in Palembang (South Sumatra)," he said, adding that ideally a city the size of Palembang should have 3,000 bajaj.

The two companies also plan to offer replacements for old bajaj -- notorious for causing pollution -- in Jakarta, with compressed natural gas (CNG)-fueled bajaj worth Rp 31 million each.

Jakarta administration has been determined to phase out bajaj in favor of locally made kancil (mini-taxi, literally means "mouse deer" in Bahasa Indonesia).

Another Indian motorcycle company, TVS Motor Co., also plans to set up a manufacturing plant with an investment of $80 million.

TVS is part of a large South Indian manufacturing group with combined annual sales of $2 billion, the company's senior vice president, BLP Simha, told The Jakarta Post. In 2002, the company manufactured more than one million motorcycles.

"We project to produce some 120,000 units of motorcycle as our plant reaches its full production capacity by mid-2006," he said, adding that it was expected that the planned manufacturing plant here would employ some 5,000 people, similar to the factory in India. (003/004)