Hyundai Motor stated on Tuesday it has signed a deal to construct a new factory in Indonesia, which is going to be its first car plant in Southeast Asia and a blow to Japanese competitors that dominate the market.
The deal comes as Hyundai and affiliate Kia Motors continue to have a hard time with a prolonged sales drop in China, where they suspended two factories in 2019.
Hyundai Motor stated it will invest about $1.55 billion in the Indonesia auto manufacturing plant from now until 2030. It will also invest in product development and operation costs.
The facility, to be constructed in the city of Bekasi, east of Jakarta, will begin production in 2021, with a yearly capacity of 150,000 vehicles and a strategy to increase that to 250,000 vehicles a year, Hyundai stated.
Hyundai prepares to make small sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs), whereas electric vehicles (EVs) adapted to the Southeast Asian market are under consideration.
Hyundai stated it is constructing the production facilities to prevent import tariffs ranging from 5% to 80% in the ASEAN region. The plant will cater to Indonesia, the region’s largest automobile market, and other nations belonging to the Association of Southeast Asian Nations (ASEAN), it stated.
The plant will permit the automaker to safeguard future growth to help it “combat slowing demand in the global automotive market”, Hyundai stated.
The deal was signed at an event that was attended by Indonesian President Joko Widodo and Hyundai Motor Executive Vice Chairman Euisun Chung. Widodo is currently in South Korea for a meeting of ASEAN leaders hosted by South Korean President Moon Jae-in.
Moon has been pressing a “New Southern Policy” intending to deepen ties with Southeast Asia as Seoul seeks to curb its dependence on traditional trading partners such as China and the United States.
Hyundai is really behind Japanese competitors in Southeast Asia, with its sales reaching 122,883 vehicles against Toyota’s 854,032 from January to September 2019, according to research firm LMC Automotive.
Hyundai stated key ASEAN countries consists of Indonesia, Thailand, Malaysia, Vietnam, and Singapore are expected to see combined vehicle sales increase to 4.49 million units in 2026, from 3.16 million in 2017.