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Toyota mulls expansion in Indonesia amid political uncertainty in Thailand

Publication Date : 05-06-2014

 

Japanese carmaker Toyota Motor Corporation (TMC) may expand its production capacity in Indonesia amid the continuing political uncertainty in Thailand, a senior minister says.

The plan would be in line with Toyota’s long-term outlook to make Indonesia its regional production hub, Industry Minister MS Hidayat said Wednesday.

“I requested Toyota to increase production capacity by 20 per cent,” he said after meeting executives from Toyota Astra Motor (TAM), a local marketing arm of the firm.

Apart from boosting its production volume in Indonesia, Toyota aims to raise its exports from Indonesia, Hidayat further said.

Late last month, Thailand’s military instigated a coup, causing investors to loose their appetite for business there.

Some analysts have said that Indonesia, the biggest economy in the region, could be the next choice, notably for automakers, as massive investment in the sector from global manufacturers, including Toyota, have been channeled to build new production facilities or upgrade existing plants.

Toyota, through its local producing arm Toyota Motor Manufacturing Indonesia (TMMIN), currently runs four plants in Indonesia with an overall production capacity of 250,000 vehicles each year.

To push down costs, Toyota built an engine plant in February, which is scheduled to be completed early 2016.

TMMIN, since last year, has gradually shifted some of its production in Thailand to Indonesia with the assembling of the Etios Valco hatchback and Vios sedan beginning last year.

First exporting in 1987, Toyota now ships its Indonesian-made cars, including sport utility vehicle the Rush and the small MPV Avanza, to more than 70 countries worldwide.

Toyota is also looking into the possibility of producing more eco-friendly cars, particularly hybrids, in Indonesia and asked the government to provide the necessary incentives to lower price, Hidayat said.

Industry Ministry officials will further discuss the issue with the firm, he added.

At present, hybrid cars are about 40 per cent more expensive than regular cars, according to Hidayat, and that hinders sales of hybrids in a market like Indonesia, which is still price-sensitive.

Indonesia will have to compete with Malaysia in eco-car production as the latter recently allowed local production of hybrid and electric passenger vehicles by foreign car manufacturers.

Newly appointed TAM president director Hiroyuki Fukui, however, did not confirm the plan to relocate its production from Thailand to Indonesia.

Toyota would need to raise its exports to 30 per cent of its total production in its local plants, he said.

Exports of Toyota from its Indonesian plants are still less than 20 per cent of its total output.

The firm earlier said it would export a few additional models this year to boost overseas sales, but did not elaborate.

“We discussed [with the minister] export from our plant in Karawang [West Java] and how to increase our exports to 30 per cent,” he said after the meeting.

 

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