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oyota Motor Company (TMC), the world'€™s top selling automotive manufacturer, announced on Wednesday that it would spend another Rp 2.3 trillion (US$230 million) on constructing a new engine plant in Karawang, West Java.

The new plant will be built by the company'€™s subsidiary PT Toyota Motor Manufacturing Indonesia (TMMIN) on a 150-hectare plot located near the company'€™s existing plant in Karawang. The plant will have a production capacity of 216,000 units a year, the company said in a statement.

The new plant will produce engines for cars other than the Innovative International Multi-purpose Vehicle (IMV) series including Hilux, Kijang Innova and Fortuner, which are already produced in Toyota'€™s plants in Sunter, Jakarta and Karawang. Operations are slated for the first semester of 2016. About 50 percent of the total production will be exported.

At present, Toyota produces 195,000 car engines a year for IMV series at the company'€™s plant in Sunter, North Jakarta.

Indonesia is the second largest production base for Toyota, after Thailand, which is still Southeast Asia'€™s biggest automobile market, with an annual production capacity of over 600,000 vehicles.

In its plans to develop Indonesia as an export base, in March this year Toyota started the operations of its Rp 3.3 trillion auto plant in Karawang, which has a production capacity of 70,000 units per year, boosting overall car capacity production to 180,000 units.

Toyota aims to reach an output of 250,000 units per year by 2014. In its initial phase the plant will make Toyota'€™s Etios Valco, and plans to increase production capacity to 120,000 units per year in 2014.

Toyota currently exports vehicles, engines and other components from Indonesia to countries in Asia, the Middle East and South America.

The industry'€™s sales expectation this year is lower than last year partly due to new government policies, including the increase in the lending rate and the rise in the minimum down-payment for car purchases.

Auto sales in Indonesia, Southeast Asia'€™s largest economy, reached 1.12 million units last year, up 24.83 percent from 2011, higher growth than other Asian countries, including China, India and Thailand.

Between January-June, car sales expanded by 12.46 percent to 601,952, slightly exceeding previous market expectations, an industry report by the Indonesian Automotive Industry Association (Gaikindo) said.

The sales target this year is expected to rise 10 percent to 1.2 million units while the increase in 2012 was 24.8 percent.

Gaikindo deputy chairman Johnny Darmawan said recently that sales might slow down in the second half of the year due to the fuel price hike and higher lending rates following Bank Indonesia'€™s move to increase its benchmark rates.

These factors, he said, will affect consumer purchasing power and possibly hurt sales, adding that sales might only reach 500,000 units, bringing whole-year sales to around 1.1 million units.

Honda, Toyota'€™s closest competitor, has a new Honda car factory in Mitrakarawang Industrial Estate, Karawang, in the pipeline. The plant is scheduled to operate in the first quarter of 2014, with a capacity of 120,000 units per year.

Honda Prospect Motor, a joint venture between Japan'€™s Honda Motor Co and Indonesia'€™s Prospect Motor, invested Rp 3.1 trillion in the construction of a new auto plant in Indonesia, tripling its current production capacity. (asw)