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Automobiles

Chinese, Korean carmakers penetrate Japanese-dominated Indonesia

Hyundai to complete Indonesian plant construction around end-2021; small SUV, MPV, EV to be launched

By Aug 30, 2021 (Gmt+09:00)

Indonesian President Joko \
Indonesian President Joko "Jokowi" Widodo visited Hyundai Motor's factory in Ulsan, South Korea, in November 2019 to sign an agreement on Hyundai's plan to set up a car plant in Indonesia. Hyundai aims to expand market shares in Indonesia and Southeast Asia with the new plant.

Hyundai Motor Co. is set to start producing automobiles in Indonesia around the end of this year to attract drivers in the Southeast Asia’s largest economy. That came as Hyundai along with Chinese automakers are penetrating the market dominated by Japanese players with an aim to expand their presence in the entire Southeast Asia.

Hyundai Motor Co. plans to complete construction of its first plant in the region with a capacity of 150,000 units a year around end-2021. The plant will roll out a small sport utility vehicle (SUV) and a small multi-purpose vehicle (MPV), while considering production of an electric vehicle only for ASEAN markets. Hyundai also teamed up with LG Energy Solution Ltd. to invest 1.2 trillion won ($1 billion) to build an EV battery plant with an annual capacity of 10 GWh, enough for 150,000 EVs, which will start production in the first half of 2024.

China’s Chery Automobile plans to launch five new models including conventional SUV and eco-friendly cars in the next two years in Indonesia, according to local media reports. Chery had attempted to break into the country in early 2000s but failed to capture the automotive market in the country.

Wuling Motors Corp., General Motor Co.’s China joint venture with SAIC Motor and a smaller company, aims to produce low-cost EVs in the Southeast Asian nation as the government is determined to allow only EVs, banning sales of internal combustion engine models, from 2050. Chinese EVs, whose prices are more competitive, are following Japanese models’ quality with more warranties, Indonesian media reported.

Indonesia is a prospective car market with about 1 million new units sold a year. The world’s fourth most populous country has strong growth potential as the ratio of car ownership to total population stood at less than 100 cars per 1,000 people. The government is also developing infrastructure including roads and highways. It is easier for automakers to exports cars to neighboring Southeast Asian countries.

Japanese automakers have been dominating Indonesia since 1970s with their combined market share at around 95%. Toyota Motor Corp. was the No. 1, taking 31.3% of the market in the first seven months of this year, followed by Daihatsu Motors with 18.3%, Mitsubishi Motors Corp. with 12.8%, Honda Motor Co. with 12.5% and Suzuki Motor Corp. with 10.5%. These Japanese companies occupied the top five brands in the country.

Chinese and South Korean makers started chasing them, analysts said. Wuling doubled its market share to 3.1% in July from 1.5% in January with its sales surging 517.2% in the first seven months of 2021 from a year earlier.

Hyundai Motor Group is also aiming to expand its presence in the country. In the first seven months of the year, Hyundai Motor and Kia Corp. took 0.3% and 0.4% of the market, respectively, but their sales jumped 372.2% and 396%, the No. 3 and No. 2 rise, suggesting they have growth potential there.

Chinese and South Korean automakers’ such moves in Indonesia prompted some concerns among Japanese media.

The Nihon Keizai Shimbun (Nikkei) last month said China and South Korea were speeding up development in eco-friendly cars while Japan was reluctant to give up internal combustion engine vehicles in Indonesia and Thailand. Japan may lose the market as if it did in home appliances and smartphone sectors before, the Nikkei added.

Write to Hyung-Kyu Kim at khk@hankyung.com

Jongwoo Cheon edited this article.

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