Kia to expand debatable Indonesian auto project
Kia to expand debatable Indonesian auto project
JAKARTA (JP): South Korea's Kia Motors Corp. said it would
expand its controversial Indonesian auto project by increasing
its tax-exempt commercial-vehicle exports and boosting production
from local assembly lines.
"Kia and the Indonesian authorities have agreed to add small-
sized commercial vehicles to the national car project," Kia's
vice president, Kim Seung-Ahn, told AFP in Seoul yesterday.
The expansion statement came amid strong protests from Japan,
the United States and the European Union, which have filed
complaints with the World Trade Organization (WTO) over Kia's
favored status in Indonesia.
"The commercial vehicle, too, will stand to benefit from
exemption from tariffs and luxury taxes," said Kim, who had just
returned from Indonesia.
The entrance of the tax-exempt commercial vehicles will
challenge the dominance of Japanese commercial vehicles in
Indonesia.
Due to the high prices of passenger sedans in Indonesia, there
is a strong market for Japanese commercial vehicles which have
been modified into passenger vehicles. The most popular
commercial-passenger vehicles are Toyota Kijang, Daihatsu Espass
and Suzuki Sidekick.
Kia officials have described the Indonesian commercial vehicle
market as "very lucrative", with 270,313 vehicles with less than
five-ton loading capacity sold in 1995, compared with sales of
37,835 passenger cars.
Kia's Indonesian partner PT Timor Putra Nasional -- controlled
by President Soeharto's youngest son Hutomo Mandala Putra -- is
importing Kia cars from South Korea tax free until the company's
Indonesian production lines come on stream in 1998.
The import-tax exemption, which rivals say breaks WTO rules,
was granted by the government when PT Timor Putra Nasional was
assigned special status as the official manufacturer of
Indonesia's "national" car.
Kim said Kia and its partner had also agreed to lift the
annual production capacity of the joint Indonesian plant,
currently under construction and due for completion in 1998, from
the original target of 70,000 to 120,000 units.
Kia, South Korea's second-largest automaker, has shipped about
10,000 four-door compact sedans with 1,500-cc engines, named
Timor in Indonesia and Sephia in South Korea, to Indonesia under
the project since September. Informed sources have said not more
than 2,000 Timor sedans have been delivered to customers.
The Timor costs US$15,245, while the tax-loaded mainly-
Japanese rivals in the same class start at around twice that
price.
Kia, which is now training Indonesian technicians in its South
Korean plant, said it would export 50,000 Timor sedans to
Indonesia annually until 1998. (rid)