Timor car maker starts constructing plant

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)