The Jakarta Post
A new joint venture company owned by Chinese and Indonesian investors is ready to produce Chinese-brand cars in Indonesia as the country's demand for vehicles continues to grow, an executive has said.
The soon-to-be-named company was established by Indonesian investor Sokonindo Automobile and Chinese vehicle manufacturer DFSK, a joint venture between China-based firms Dongfeng Motor Group and Chongqing Sokon Motor Group.
Under Sokonindo's supervision, the company will finalize the commissioning of its US$150 million assembly plant in Tangerang, Banten, in November before launching its trial production of Chinese-brand Sokon cars, according to commissioner Alexander Barus.
'For the first phase, we will produce at least 50,000 cars per year. We started construction of the factory in November last year, and we've now reached 40 percent of the target,' Alexander said recently.
Alexander, who is also the CEO of industrial park developer Indonesia Morowali Industrial Park, said the facility was located at the former factory of Chinese-brand motorcycle Sanex, which ceased production a few years ago.
The company is expanding the former Sanex factory with four more conveyor lines and its Chinese headquarters is finalizing the main machinery, some of which has arrived at Tanjung Priok port in North Jakarta.
Alexander said the company would produce multi-purpose vehicles (MPV), including diesel-based cars with 1,300cc engines and gasoline-based cars with 1,500cc, adding that 'the quality of their engines is guaranteed to be one notch above the ones made in China.'
The company, he said, would focus on the domestic market for the first four years, aiming for exports in the fifth year of production.
'In the next five years, we aim to be Sokon's base production in ASEAN and we also aim to increase local content up to 80 percent for our products,' Alexander said.
The company, he went on, had signed a partnership agreement with local firm Kaisar Motorindo Industri, a brand-holder sole distributor (ATPM) of three-wheeled Kaisar motorcycles, which would help build after-sales service centers in at least 40 main dealers across Indonesia in an effort to ensure market continuity.
Alexander acknowledged that the lack of after-sales service centers had often been a major obstacle for Chinese-brand vehicles to grow in Indonesia in the past few years. Similar problems are believed to have caused production of Sanex motorcycles to halt.
'We are ready to compete in terms of quality, price, delivery and after-sales service and of course, customers have the right to choose the best,' Alexander said.
A reliable after-sales service was important as customers become smarter with their choices, echoed Johnny Darmawan, deputy chairman of the Association of Indonesian Automotive Manufacturers (Gaikindo).
'[Existing players] are not afraid to compete with newcomers, because customers will opt for the best. Low prices are no longer the top priority,' Johnny, a former CEO of Toyota Astra Motor, told The Jakarta Post.
Johnny added that his business group had yet to receive information about Sokon as a new player entering the local market, but said he would welcome the brand's application for membership after it began production. 'The local automotive industry will be more developed if there are new players coming,' he said.
Indonesia's economic downturn has impacted car retail sales, which declined by 13.7 percent to 432,000 from January to May from 501,000 in the same period last year, according to Gaikindo's data.