C

hinese cars will soon be seen on Indonesian roads as a Chinese automaker opened a US$700 million factory in Cikarang, West Java, on Tuesday.

PT SAIC-General Motors-Wuling (SGMW) Motor Indonesia, also known as Wuling Motors, plans to market the Wuling Confero S, the first model to be made at the plant, in the third quarter of this year through its 50 car dealers across the country.

Selling for between Rp 135 million (US$10,083) and Rp 165 million, the low-cost car will heighten rivalry in the low-end multipurpose vehicle (MPV) market dominated by Japanese brands, such as the Toyota Avanza, the Daihatsu Xenia, the Honda Mobilio and the Suzuki Ertiga.

SGMW Motor president Xu Feiyun said the plant would produce about 8,000 vehicles this year and expand to manufacturing two new models next year.

“In January next year, we will launch a new vehicle with a bigger [engine] capacity, while in March we will introduce another one with a smaller [engine] capacity,” he told reporters during the factory opening.

Feiyun added that his firm would assess market response before deciding on making new products after next year. To support distribution, SGMW Motor plans to set up 30 more car dealers in 2018.

SGMW is a joint venture between China’s SAIC Motor Co. Ltd., Guangxi Automobile Group Co. Ltd. and the United States’ General Motors. The new factory has a production capacity of 120,000 vehicles a year and employs 3,000 workers.

Global automakers see Indonesia as a lucrative market, with some pouring billions of dollars in investment into local facilities since 2010.

However, car sales, an indicator of consumption in the country, have dwindled in past years because of people’s weakening purchasing power caused by the economic slowdown.

Despite such a situation, investors, including SGMW Motor, have not stepped back but instead continue to invest with a long-term outlook.

To support its operation, the firm has also built a 60-hectare supplier park, which also started operation on Tuesday. The park hosts 15 international component suppliers and 20 local suppliers.

“As part of the localization strategy, 56 percent of Wuling Motors’ first MPV components will come from local suppliers. We also plan to continue to increase the number of local components of our products in the future, Feiyun said.

He added that in the future, the firm would increase the number of local suppliers at the park.

The Industry Ministry’s director general for metal, machinery, transportation equipment and electronic industries, I Gusti Putu Suryawirawan, acknowledged that the establishment of the plant and the supplier park would boost the development of Indonesia’s automotive industry.

“It will provide more opportunities for supporting industries because the investors have promised to welcome other producers and use their products.”

Putu added that the Industry Ministry estimated the country’s annual production capacity of 2.5 million vehicles by 2020, compared to 2 million vehicles at present.

At present, there are 70 to 80 cars per 1,000 Indonesians, which is lower than in neighboring countries, such as Thailand, where the ratio reaches 200 per 1,000 people, according to the Indonesian Automotive Manufacturers Association (Gaikindo).

“This shows the potential of the automotive market in Indonesia. With 250 million people, we only sell 1.1 million vehicles every year,” said Gaikindo chairman Yohanes Nangoi during the event. “Wuling cars will give consumers another alternative and help keep prices competitive.” (dis)