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Toyota to spend Rp 5.5 trillion (US$638 million) for Indonesia expansion

Toyota Motor Corporation will invest an additional Rp 5.5 trillion (US$638 million) in Indonesia to build a new plant and expand distribution networks in the country, a minister says.

Industry Minister M.S. Hidayat said on Tuesday that the plant would be located in Karawang, West Java, and require a Rp 2.9 trillion investment, Rp 1.7 trillion of which was announced earlier this year.

The plant will produce around 70,000 vehicles a year when complete. This will increase the annual production of PT Toyota Motor Manufacturing Indonesia (TMMIN) - Toyota’s joint venture with local partner Astra International - from 110,000 to 180,000 units.

“Toyota will also spend another Rp 2.6 trillion to expand its sales outlets throughout the country,” Hidayat said after meeting with Vice President Boediono and Toyota president director Akio Toyoda.

Toyoda met President Susilo Bambang Yudhoyono later Tuesday.

Ground braking for the new plant in Karawang has been scheduled for Wednesday.

Hidayat said that with the expansion, the Japanese car producer would employ around 20,000 people in the manufacturing, sales and component-supplying sectors in the next few years, in addition to 80,000 people currently employed.

TMMIN currently operates three factories: Sunter 1 and Sunter 2 in North Jakarta and the Karawang factory. Meanwhile, Toyota Astra motor (TAM), which handles distribution and after-sale service for TMMIN products, runs 210 outlets across the country.

TAM marketing director Joko Trisanyoto told The Jakarta Post in a telephone interview that additional production capacity from the new plant would be realized gradually. In the first phase, capacity would reach 40,000 units when the plant started operating in 2013, while the rest would be realized after 2013.

“We plan to add around 150 outlets until 2015, each worth between Rp 15 billion and Rp 20 billion,” he said, adding that they would be dispersed across the nation’s five major islands.

According to Joko, part of the new plant’s output would be allocated for exports, declining to comment further.

Indonesia’s population of almost 240 million people has created lucrative market for car sellers. The nation’s emerging middle class, stellar economic performance and improved investment environment have led several auto makers to increase investment in Indonesia. Recently, US auto maker General Motors announced plans to revive its factory in Bekasi, West Java, in early 2013, and make 40,000 Chevrolet cars for both the local and export markets. French car maker PSA Peugeot Citroen also said that it would assemble Peugeot cars in Indonesia to gain a greater share of the local market.

Several auto makers previously announced commitments to increase investment in Southeast Asia’s largest economy, including Japan’s Daihatsu Motor Company Ltd., Suzuki Motor Corp. and Nissan Motor Company; Germany’s BMW and China’s Geely Automobile Holdings Ltd.

Automobile sales topped 764,710 units last year, up 57 percent from 2010, when sales dipped following the global economic slowdown.

The Indonesian Automotive Industry Association (Gaikindo) estimates that car sales will rise only by 4.6 percent to 800,000 units this year, following supply chain disruptions in the wake of the earthquake, tsunami and nuclear crisis in Japan.

Posted on the Jakarta Post 14/09/2011

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