Volkswagen to Open Indonesia Plant
Volkswagen AG plans to open a new assembly plant in Indonesia with an initial investment of 35 million euros, or about $47 million, a sign that the Southeast Asian nation's still-robust consumer spending is keeping it attractive to foreign companies.
The planned facility, an hour east of Jakarta, the capital, will begin assembling the Touran, a compact multipurpose vehicle, and could eventually employ between 2,000 and 4,000 people, said a person with knowledge of the discussions. The Wolfsburg, Germany-based company plans to initially invest in assembly and paint operations, spending 35 million euros or more, and may later begin full manufacturing at the factory, its first facility in East Asia outside China, the person said.
Christoph Adomat, a spokesman for Volkswagen, confirmed the assembly facility would initially produce several hundred passenger cars starting in the summer, with output being steadily increased thereafter.
"This local vehicle assembly is to be set up as Volkswagen's first step toward the long-term development of Asean markets," Mr. Adomat said. He declined to comment on the potential size of the investment.
Indonesia is part of the Association of Southeast Asian Nations, or Asean, which has a free-trade agreement among its ten members and has also signed trade pacts with Australia, New Zealand and Japan.
The investment comes after Volkswagen failed to reach an agreement in 2007 over an alliance with Proton Holdings Bhd., Malaysia's state-owned car maker. That deal would have potentially given the German auto maker access to Proton's manufacturing facilities. Volkswagen was also looking at an investment in Thailand, home to Southeast Asia's largest auto industry, said the person with knowledge of the talks. Mr. Adomat declined to comment on that.
Toyota Motor Corp., Ford Motor Co. and General Motors Corp. have production facilities in Thailand. In Indonesia, Toyota, which manufactures locally, dominates the market. Although total Indonesian vehicle sales are forecast by Toyota's local affiliate to fall 30% this year, from a record 600,000 units in 2008, the company expects the market to recover in 2010, and overall consumer spending has held up better in Indonesia than many other Asian countries.
Economists predict Indonesia's economy will grow around 3% this year, down from 6.1% in 2008, but still a top performer in the region. Indonesia relies on domestic spending for two-thirds of its gross domestic product, helping cushion it more from the global economic slowdown than export-dependent Asian nations.
Consumer confidence in April, following peaceful legislative elections earlier that month, reached its highest level since December 2007, according to a central bank survey released this week.
Currently, Volkswagen cars are imported into Indonesia, meaning they are hit by tariffs of more than 200%. By assembling locally, Volkswagen's cars will be significantly cheaper for consumers than current prices.
The planned facility, an hour east of Jakarta, the capital, will begin assembling the Touran, a compact multipurpose vehicle, and could eventually employ between 2,000 and 4,000 people, said a person with knowledge of the discussions. The Wolfsburg, Germany-based company plans to initially invest in assembly and paint operations, spending 35 million euros or more, and may later begin full manufacturing at the factory, its first facility in East Asia outside China, the person said.
Christoph Adomat, a spokesman for Volkswagen, confirmed the assembly facility would initially produce several hundred passenger cars starting in the summer, with output being steadily increased thereafter.
"This local vehicle assembly is to be set up as Volkswagen's first step toward the long-term development of Asean markets," Mr. Adomat said. He declined to comment on the potential size of the investment.
Indonesia is part of the Association of Southeast Asian Nations, or Asean, which has a free-trade agreement among its ten members and has also signed trade pacts with Australia, New Zealand and Japan.
The investment comes after Volkswagen failed to reach an agreement in 2007 over an alliance with Proton Holdings Bhd., Malaysia's state-owned car maker. That deal would have potentially given the German auto maker access to Proton's manufacturing facilities. Volkswagen was also looking at an investment in Thailand, home to Southeast Asia's largest auto industry, said the person with knowledge of the talks. Mr. Adomat declined to comment on that.
Toyota Motor Corp., Ford Motor Co. and General Motors Corp. have production facilities in Thailand. In Indonesia, Toyota, which manufactures locally, dominates the market. Although total Indonesian vehicle sales are forecast by Toyota's local affiliate to fall 30% this year, from a record 600,000 units in 2008, the company expects the market to recover in 2010, and overall consumer spending has held up better in Indonesia than many other Asian countries.
Economists predict Indonesia's economy will grow around 3% this year, down from 6.1% in 2008, but still a top performer in the region. Indonesia relies on domestic spending for two-thirds of its gross domestic product, helping cushion it more from the global economic slowdown than export-dependent Asian nations.
Consumer confidence in April, following peaceful legislative elections earlier that month, reached its highest level since December 2007, according to a central bank survey released this week.
Currently, Volkswagen cars are imported into Indonesia, meaning they are hit by tariffs of more than 200%. By assembling locally, Volkswagen's cars will be significantly cheaper for consumers than current prices.