Honda to set up 3rd motorcycle plant in Bekasi

Zakki P. Hakim, The Jakarta Post, Jakarta

Japan's Honda Motor Co. Ltd. will set up a third motorcycle manufacturing plant in Indonesia in a joint venture with PT Astra International to take advantage of the growing motorcycle market in Indonesia, the world's third largest market, the company announced on Wednesday.

The new US$100 million plant, located at MM2100 industrial estate in Cikarang Barat, Bekasi, West Java, will start production in October 2005, and have an annual capacity of up to 1.2 million units.

PT Astra Honda Motor (AHM), the joint venture company, currently produces 2 million motorcycles from the existing two plants, located in Sunter and Pegangsaan, both in Jakarta.

AHM president director Minomaru Yamashita said on Wednesday that Honda was enhancing its production capacity by adding a new plant as the market was expected to grow even more this year.

"When the new plant is running at full capacity, Indonesia will replace India as the biggest Honda motorcycle producer in the world," he was quoted as saying by Antara during a ground- breaking ceremony.

India currently produces about 2.3 million motorcycles annually, almost half of the Indian market of 5.5 million units this year. The biggest market in the world, meanwhile, is China with a market size of 14 million units this year.

The motorcycle market in Indonesia reached 3.3 million units in 2003, a 22 percent jump from 2002.

The local market is expected to grow even more in 2004 to about 4 million units, according to the Ministry of Industry and Trade.

Director general of metal, machine, electronics and miscellaneous industries at the ministry, Soebagyo, said in his speech: "The decision (to invest in Indonesia) is a sign that investors trust Indonesia as a place where they can expand their businesses."

He was hopeful that with the new Honda investment, Indonesia could become a key base for world motorcycle production.

The new plant is expected to directly provide new 4,000 jobs and indirectly create more jobs in some 150 local component manufacturers and suppliers.

Meanwhile, AHM marketing director Johannes Hermawan said that Honda production here would continue to be focused on the domestic rather than the export as it would took time before the firm could fully adopt the Euro II exhaust gas standard required in some export destination countries.

In 1998, motorcycle sales in Indonesia dropped to 492,626 units from 1.85 million in 1997 as the country felt the pinch of its worst-ever economic crisis. Sales started to recover in 1999 with 587,402 units sold that year. Sales further increased to 979,000 motorcycles in 2000, despite the entry of several Chinese brands into the domestic market.

Sales eventually moved closer to the pre-crisis level by reaching 1.64 million units in 2001, before soaring to 2.29 million units in 2002. The availability of cheap bank loans, thanks to the lower interest rate environment, contributed to the strong sales.

Prior to the monetary crisis the local market was dominated by Japanese brands Honda, Yamaha, Suzuki and Kawasaki, and Italian brand Piaggio Vespa. In the late 1990s, cheaper Chinese motorcycles started to flood the country.