Chinese auto company to set up manufacturing plant in E. Java
Zakki P. Hakim, Jakarta
China's automotive company Great Wall Motors (GWM) plans to set up a car manufacturing plant in East Java in a joint venture with Indonesia's state-owned heavy equipment maker PT Bharata, according to a senior official at the Ministry of Industry and Trade.
Director General of Metal, Machinery, Electronics and Miscellaneous Industry Subagyo told reporters on Wednesday that the venture would initially focus on manufacturing cheaper multipurpose vehicles (MPVs) with a price tag of below Rp 100 million (US$10,793) per unit.
Subagyo said the value of the investment involved "trillions of rupiah" (hundreds of millions of U.S. dollars), and that GWM expected to start the project at the end of this year.
"After entering the market with MPVs, they might launch pick- ups," he said.
He said that a memorandum of understanding between the two companies was expected to be signed in August during a visit to China by Minister of Industry and Trade Rini MS Soewandi.
Subagyo said GWM might use Indonesia as its base for expansion to other Southeast Asian countries.
GWM is a holding company specializing in the manufacture of pick-up trucks in China, with an annual production of 100,000 units, and claiming to hold a more than 50 percent domestic market share. GWM exports 3,000 units annually to the Middle East, West Asia, North Africa and South America according to its website.
Reports said that GWM also aims to penetrate the U.S. market in around October by offering compact Sport Utility Vehicles (SUVs) and pick-ups with appealing prices of between $9,000 to $15,000 per unit.
Industry analyst Suhari Sargo said that there was still ample room for new players to enter the domestic car market considering the relatively low ratio of car ownership in the country.
"So I believe the automotive business will keep growing," Suhari said, adding that MPVs currently dominate about 70 percent of the local car market share. A couple of Japanese carmakers here have already started selling cheaper MPVs with a price tag of less than Rp 100 million per unit.
Suhari said the car ownership ratio in Indonesia was about one car for 35 people. In Malaysia, the ratio is 1:8, while in Thailand it is 1:15.
According to data from the Association of Indonesian Automotive Manufacturers (Gaikindo), new car sales reached 354,482 units last year, a 12 percent increase from the previous year's 217,763. Gaikindo targeted sales to reach 385,000 this year.
Suhari also said that the Chinese carmaker could make a strong debut in the local market despite the fact that Chinese motorcycle makers had earlier failed to compete with their Japanese rivals here.
He pointed out that the Chinese automobile industry was far more advanced than the motorcycle industry.
He added that the failure of Chinese motorcycles to penetrate the local market as also due to the fact that the bikes were imported by general importers who lack the commitment to after- sales service.
"Now, Chinese cars have competitive features compared to established global brands," he said, while also acknowledging that the cars would still need some time and a strategy to gain the trust of the Indonesian people.