Daily Management Review

First Car Factory in Indonesia To Be Set Up By Hyundai At $1.55 Bn


First Car Factory in Indonesia To Be Set Up By Hyundai At $1.55 Bn
An agreement for construction of a new car manufacturing plant in Indonesia has been signed by South Korea’s Hyundai Motors which will be the first such facility of the company in Southeast Asia outside of its home market, the company announced on Tuesday. The aim of the company is also to challenge the dominance of the Japanese car brands in the market. 
This announcement was made at a time when the company’s affiliate brand Kia Motors is facing troubles of demand in the Chinese market. Two manufacturing facilities of the company had to be closed down earlier this year in China.
The new factory in Indonesia will cost Hyundai Motor about $1.55 billion till about 2030, the company said. It plans to conduct a host of business activities at the Indonesian facility and the total investment includes activities such as product development and operations.
Hyundai said that the city of Bekasi, east of Jakarta will be the place for the new factory and it expects that production will begin there by late 2021. The company also plans to install an initial annual production capacity 150,000 vehicles with options of increasing that to reach about 250,000 vehicles annually. Hyundai said that the segments that would be catered to at the new factory will include small sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs). The facility would is also being planned to be used for manufacturing of electric vehicles (EVs) customized for the Southeast Asian market.
Currently the company has to endure import tariffs of between 5 per cent and 80 per cent in the ASEAN region and this new facility will help the company to avoid such import duties. Hyundai said that the cars that would be manufactured in Indonesia will be targeted for the Indonesian market – the largest market of the Southeast Asia, as well as other markets in the ASEAN region.
Hyundai said in its statement that the new Indonesian production facility would ensure that the company is able to grow in the future to help it “combat slowing demand in the global automotive market”.
Indonesian President Joko Widodo and Hyundai Motor Executive Vice Chairman Euisun Chung signed the deal during a visit to South Korea by the Indonesian leader. 
The deal was signed at an event attended by Indonesian President Joko Widodo and Hyundai Motor Executive Vice Chairman Euisun Chung. Widodo is in South Korea for a meeting of ASEAN leaders hosted by South Korean President Moon Jae-in.
The South Korean President Moon Jae-in has been pursuing a policy of building up strong relationship with countries of Southeast Asia, called the “New Southern Policy”, with  the aim of reducing the country’s dependence on its traditional trading partners such as the united States and China.
In the South Asian market, the share of Hyundai lags far behind its Japanese rivals. According to data from the research firm LMC Automotive In the January to September period of this year, Hyundai sold 122,883 vehicles in the market compared to 854,032 sold by Japan’s Toyota.