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hina-based automaker SAIC-GM-Wuling Automobile (SGMW) Corp. Ltd. has kicked off the construction of a factory in Indonesia, its first in Southeast Asia, as it seeks to expand its business in the region.

Located in Bekasi, east of the capital Jakarta, the factory carries a total investment of US$700 million and will be capable of producing up to 150,000 vehicles a year.

The plant, the construction of which is set to be completed by July 2017, is part of the company'€™s global expansion plan. It chose to develop a factory in Indonesia based on its strategic position as a hub for the Southeast Asian market, from which it could sell products to neighboring countries, such as Malaysia, the Philippines, Singapore and Thailand in the future.

'€œIndonesia has the biggest economy in Southeast Asia. It has potential for the automotive market,'€ said Yuan Zhijun, vice president of PT SGMW Motor Indonesia, the company'€™s subsidiary in Indonesia.

The company will seek to step up its production in the long run in order to distribute its products to other Southeast Asian countries.

'€œThe first production will be focused to supply [the] Indonesian market. We will seek to [export] our cars to neighboring countries afterwards,'€ PT SGMS Motor Indonesia'€™s President Xu Feiyun told reporters on the sidelines of the factory'€™s ground-breaking ceremony on Thursday.

Xu said the company would manufacture cars with 50 percent local content and would plan to increase the local content in the future.

That is in accordance with the aim of the Indonesian government, which wants carmakers to increase their use of local content in order to benefit the country.

'€œThe Trade Ministry is ready to bridge the company and local component industries,'€ said I Gusti Putu Suryawirawan, the ministry'€™s director for base metal industries.

He added that SGMW was currently collaborating with 40 local component producers.

Meanwhile, Xu cited big challenges in doing business in Indonesia given the fact that Japanese cars account for around 91 percent of the total automotive market in Indonesia. He said, however, that he was optimistic the company would be able to increase its market share as it had 30 years of experience in the industry.

'€œAt the beginning we may only have a 5 percent share. But [we] will increase it to 10 or 15 percent as we go. The most important thing is to understand the market'€™s appetite,'€ Xu explained.

In addition, the Investment Coordinating Board (BKPM) said it had made efforts to convince the Chinese company to enter the Indonesian market since there was already a perception that the country'€™s market was dominated by Japanese products.

'€œWe convinced them that after-sale services were more important than brands,'€ said Harri Santoso, the BKPM'€™s coordinator for investment marketing for China.

SGMW is a joint venture of three companies: SAIC Motor Corp. Ltd, General Motors and Guangxi Automotive Corporation. It produces mini-commercial vehicles and multipurpose vehicles (MPV).

The company has exported its products to South America, North Africa and the Middle East, where they are sold under the General Motors Chevrolet brand.

In 2014, the company sold more than 1.8 million vehicles with a total value of US$11.92 billion, or a 20.7 percent increase from the same period in the previous year. (saf)