JAKARTA—Toyota Motor Corp. said it would crank up production in Indonesia by more than 60% in a move to maintain its dominant position in Southeast Asia’s largest economy.
Japan’s largest auto maker said Tuesday that it will invest around $340 million to build a new factory which will lift its capacity to 180,000 vehicles a year in Indonesia by the middle of 2013, from about 110,000 vehicles today.
As Toyota struggles with a downturn in demand at home and key export markets like the U.S. and Europe, Indonesia continues to be a sweet spot for the company. It is expected to sell around 300,000 vehicles in Indonesia this year giving it about 40% of the rapidly growing market.
“This market is helping cheer us up,” said company President Akio Toyoda, who rode into a Jakarta news conference in a Kijang, the boxy truck Toyota designed for Indonesian roads and consumers in the 1970s. “Globally the news is so dark so we’re thankful the market here is bright and vibrant.”
While it has struggled in some of the larger emerging markets—including China and India, where it has less than a 5% market share—Toyota has a special bond with Southeast Asia. With market shares of more than 30% in Indonesia, Thailand and the Philippines, Toyota is more popular in the region than in Japan where it has a 26% share, or the U.S, where only 11% of cars sold so far this year are Toyotas, according to researcher J.D. Power and Associates.
Toyota controls an additional 15% of the Indonesian market through its subsidiary Daihatsu Motor Co. While Daihatsu is known for its mini-cars in Japan, it has boosted its slice of the Indonesian market from less than 10% five years ago to close to 16% today with affordable vehicles designed for developing market consumers.
“They want to utilize this market as a pilot to test the models,” which are then exported to, and possibly will eventually be produced in, other emerging markets, said Amelia Tjandra, managing director of PT Astra Daihatsu Motor, Daihatsu’s Indonesian arm.
Consumers in Southeast Asia are increasingly important for international companies like Toyota. As the 10-member Association of Southeast Asian Nations lowers the barriers of trade between Southeast Asian countries, they are drawing more attention from multinational companies that believe the region can in some ways compete with China and India, with close to 600 million consumers and a combined gross domestic product bigger than India’s.
Car sales in Southeast Asia are expected to hit 2.2 million vehicles this year, increasing to 2.7 million vehicles a year by 2015, analysts say. Demand in Indonesia is expected to climb from around 900,000 vehicles this year to 1.2 million by 2015.
Toyota’s decision marks the further rise of Indonesia as the region’s next big auto export hub. It has historically lost out to Thailand as an investment destination because of a reputation for poor infrastructure, corruption and confusing regulations. But Indonesia, which has the world’s fourth-largest population after China, India and the U.S., has become more attractive in the last five years as high commodity prices have boosted incomes across the archipelago, which is rich in coal, palm oil and other natural resources.
Even when Toyota is expanding in China and India, “they are still investing in this region,” said May Arthapan, to Bangkok-based, director of J.D. Power Asia Pacific Automotive Forecasting. “Thailand has always been their largest production base in this region and now Indonesia is coming up.”
Toyota isn’t the only company boosting production in Indonesia. General Motors Co. plans to produce a seven-seat van in Indonesia and eventually use the country as an export hub. Daihatsu Motor plans to set up a second plant in Indonesia. Meanwhile, China’s Zhejiang Geely Holding Group Co., plans to expand manufacturing capacity here.
Write to Eric Bellman at [email protected]
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By: Eric Bellman
Source: The Wall Street Journal, Sept. 13, 2011
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