Bloomberg News

Toyota to Invest 26 Billion Yen in New Indonesia Car Plant

September 13, 2011

(Updates with comment from president in eighth paragraph.)

Sept. 13 (Bloomberg) -- Toyota Motor Corp., the biggest carmaker in Asia, plans to build a second factory in Indonesia at a cost of 26.3 billion yen ($341 million) to help boost sales in emerging markets.

The plant, adjacent to Toyota’s existing factory in Karawang, will have capacity to build 70,000 vehicles a year and will supply the domestic and export markets, Masahiro Nonami, president at PT Toyota Motor Manufacturing Indonesia, said today in Jakarta.

Toyota is setting up a production hub complete with a network of suppliers in Indonesia as it aims to get half its sales from emerging markets by 2015. With domestic demand slowing and a strong yen reducing export earnings, Japanese carmakers including Toyota and Suzuki Motor Corp. are investing to expand output in Southeast Asia’s biggest economy, where rising incomes may boost car sales to 1 million a year by 2013.

“To ultimately cut production costs, automakers need to bring their entire network of suppliers overseas,” said Takeshi Miyao, an analyst at consulting company Carnorama in Tokyo. “With import taxes and shipping costs, companies need to do more than to simply take assembly plants overseas.”

Toyota rose 0.9 percent to 2,649 yen at the 3 p.m. close of Tokyo trading.

Karawang Plant

Karawang Plant No. 2 is scheduled to start production in early 2013, Toyota said in a faxed statement.

Karawang Plant No. 1 has annual capacity of 110,000 vehicles and builds the Kijang Innova minivan and Fortuner sport-utility vehicle, while the second plant will make new vehicle models, the company said. Toyota said it will have annual local capacity of 180,000 vehicles in early 2013.

“The market continues to grow very fast here, and we saw the need for additional production,” Toyota’s President Akio Toyoda said today in Jakarta.

Four Toyota affiliates are scheduled to begin operations in the country in June, said Kosuke Ishida, a spokesman for Toyota Tsusho Corp., a trading company owned by the carmaker. Toyota Tsusho set up a consulting company in Indonesia last month to help Toyota’s suppliers and other companies enter the market.

For vehicles produced in Indonesia, “Toyota is trying to switch to locally supplied parts,” Toyoda said. “For a healthy development of the auto industry, we need a very solid base for parts sourcing.”

Suzuki is spending 30 billion yen to build an engine factory in Indonesia by March, the Hamamatsu, Japan-based automaker said in June.

‘Produce Locally’

“Japanese carmakers are looking to produce locally, rather than export from Japan,” Toyota Tsusho’s Ishida said. Income growth in Indonesia helped boost industrywide car sales in the nation to a record 700,000 last year, he said.

Indonesia projects its gross domestic product will rise as much as 7 percent next year. Toyota expects its sales in the country to exceed 300,000 vehicles this year after rising to a record 281,000 in 2010.

Deliveries in Indonesia may soon match those in Thailand, where Toyota sold 326,007 vehicles last year, Yasuhiro Takahashi, Toyota’s group manager of operations for the Asia and Oceania regions, said Sept. 5.

“Income levels are rising and demand for cars to transport people is growing,” Takahashi said.

Toyota, the biggest carmaker in Indonesia, entered the country in 1971.

Daihatsu Motor Co., 51 percent owned by Toyota, makes the Avanza minivan at one of its two nearby plants and supplies it to the parent company, which sold 141,000 units of the model in Indonesia last year.

Indonesia’s gross domestic product increased 6.49 percent in the three months to June from a year earlier, the Central Bureau of Statistics said Aug. 5.

--Editors: Terje Langeland, Dave McCombs

To contact the reporter on this story: Anna Mukai in Tokyo at amukai1@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net; Femi Adi in Jakarta at fadi1@bloomberg.net

To contact the editor responsible for this story: Kae Inoue in Tokyo at kinoue@bloomberg.net


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