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VW re-assesing investment plan in Indonesia

Publication Date : 17-07-2014


Europe’s biggest automaker Volkswagen AG (VW) is re-assessing its plan to build a new plant in Indonesia after a delay earlier this year.

VW Indonesia chief executive officer Andrew Nasuri said the re-assessment of the overall investment project included the recalculation of its estimated investment value, which was earlier put at US$140 million.

The plan had been dropped primarily due to the significant depreciation of the local currency.

“VW sees a very good prospect in the Indonesian market as income per capita of our population continues to rise, which offers it enormous opportunities to tap into. It’s only a matter of inappropriate timing,” he told reporters during a media briefing on Tuesday evening.

Andrew did not elaborate on when the study would finish and the project would kick off, but hinted it could be next year at the earliest.

VW earlier aimed to build its second plant in Indonesia, designed to produce 80,000 vehicles each year, in Cikampek, West Java.

At present, VW already runs a plant in Cikampek that assembles 5,000 vehicles annually.

It has now reached its full production capacity.

The new production facility will allow the German-based automaker to expand the assembly of some models, which are currently exported directly from Germany in the form of completely built-up (CBU) units.

This will help VW push down its prices, gaining a competitive edge over its competitors, such as Japanese car-maker Honda.

Delivering 9.5 million vehicles globally, VW booked the third largest sales worldwide last year, after Japan’s Toyota Motor Corporation and the US’ General Motors (GM).

In Asia, the firm has a strong foothold in China, dominating the market of more than 1 billion, along
with GM.

However, VW’s sales in Indonesia are still much lower than those of other global automakers, primarily Japanese companies, with the delivery of only 1,367 units in the past year.

The firm is aiming to sell around 1,565 vehicles this year, up nearly 15 per cent from a year earlier, according to Jonas Chendana, the senior national sales manager of VW Indonesia.

In the first half of this year, VW delivered 472 units to its local customers, up 15 per cent from a similar period in 2013, higher than the industry’s growth.

Car sales, an indicator of consumption in Indonesia, rose modestly by 6.66 per cent to 642,311 units in the first semester, exceeding the estimate by industry players who had anticipated sales remaining flat from last year at 1.2 million units, according to the Association of Indonesian Automotive Manufacturers (Gaikindo).

“The sales were highly driven by our two models, Tiguan and Golf, which contributed around 70 per cent to overall sales,” Jonas said in a text message.

Jonas said that to meet VW’s full-year target, his firm would still rely on the two most-popular cars. He added that sizeable sales would be derived from the annual Indonesia International Motor Show (IIMS), to be held in September.

During the event, VW will introduce new models to the Indonesian market, according to Andrew.

“Traditionally the IIMS represents a 20 per cent share of our annual sales, and this will also apply this year,” Andrew said.


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