Timor car maker starts constructing plant
JAKARTA (JP): PT Kia Timor Motor, a joint venture between South Korea's Kia Motors and PT Timor Putra Nasional, started building its US$275 million car manufacturing plant in Cikampek, West Java, yesterday.
Timor Putra's president Hutomo Mandala Putra (Tommy) said the plant would start commercial production in October next year with an annual capacity of 70,000 Timor sedans and 50,000 Sportage sports utility vehicles.
The plant's capacity would be increased gradually to 200,000 cars a year, Tommy said.
The joint venture is 35 percent owned by Timor Putra, 35 percent by Indonesia's PT Indauda, and 30 percent by South Korea's Kia Motors Corporation.
"We shall also produce a 1,000cc cheap car costing less than Rp 20 million ($8,474)," Tommy said after a ceremony to mark the groundbreaking of the planned 73-hectare-plant.
Tommy, President Soeharto's youngest son, refused to elaborate on the cheap car.
In February last year the government granted pioneer status to Timor Putra to produce a national car with Kia Motors. The pioneer status gives the company tax breaks, including exemption from import duties and luxury tax sales. The tax incentives will enable the company to sell its cars in Indonesia at half the price of Japanese cars in the same class.
Sedans are normally subject to between 100 percent and 200 percent import duty, and luxury tax of between 25 percent and 35 percent.
The Timor car, according to government regulation, should have a 60 percent local content within three years. Tommy said the three years began in last October.
The company allows the car to be imported from Kia Group before its manufacturing plant begins operation.
PT Timor Industri Komponen, owned by PT Timor Putra, would also start producing components in cooperation with several vendors to support the car manufacturing plant, he said.
It has signed cooperation agreements with 36 local and foreign vendors and plans to tie up with 140 local and foreign vendors.
Timor Industri Komponen plans to invest $850 million in the component manufacturing plant.
Minister of Industry and Trade Tunky Ariwibowo and Kia Group chairman Kim Sung-Hong and 30 South Korean car component makers were present at the ceremony marking the start of building the plant.
Tunky said Timor cars had a big chance to succeed because the demand for cars in ASEAN would increase to 2 million a year when the ASEAN free trade era started in 2003.
Indonesia alone will then need 500,000 cars.
ASEAN groups Indonesia, Singapore, Malaysia, Vietnam, Thailand, the Philippines and Brunei. Myanmar, Laos and Cambodia, are expected to join soon.
Tunky said Indonesia would not only be known as a car producer in the future but also the regional center of car component manufacturing.
Kia Timor's chairman Han Sang Hoon said the company would concentrate on the domestic market in the first production year and start exporting the year after.
Tommy said he hoped 2,500 cars could be sold a month.
Japan, the United States and European Union have protested Indonesia's car policy which they said was discriminatory and have filed their complaints with the World Trade Organization.
Timor Putra also plans to assemble Timor sedans at the Indomobil car plant in Bekasi mid-year. (jsk)