The area of Bekasi-Karawang is a strategic location for car manufacturers as it is conveniently located near Indonesia's capital city of Jakarta where car demand is highest. Although infrastructure development in Indonesia is generally insufficient, there exists good access from the Bekasi-Karawang area to Jakarta through a toll road. Access to Jakarta is also important for exports from Tanjung Priok. The port of Tanjung Priok in North Jakarta is the busiest and most advanced Indonesian seaport, handling more than 50 percent of Indonesia's trans-shipment cargo traffic.

In the future exporting will be made easier for those businesses in the Bekasi-Karawang area. A new port, the Patimban Seaport, will be constructed in Subang (West Java). through Presidential Decree No. 47/2016, signed by Indonesian President Joko Widodo, the government declared this project a national strategic project, implying that all ministers, government agencies and governors need to support its development. The Patimban seaport is envisaged to become an international seaport with a 7.5 million twenty-foot equivalent units (TEU) capacity.

Currently, there are five established automotive manufacturers with assembly plants in the Bekasi-Karawang area. Combined, these five carmakers have an annual production capacity of one million vehicles. Two other companies are currently establishing their factories in this area and are expected to become operational by 2017 (adding a total of 280,000 vehicles to annual production capacity). Meanwhile, the Bekasi-Karawang area also houses six motorcycle manufacturers that can produce a total of 7.2 million motorcycle units per year.

Jonfis Fandy, Marketing and After Sales Services Director at Honda Prospect Motor (HPM), said his company owns a IDR 3.1 trillion (approx. USD $233 million) car factory in Karawang. Moreover, HPM has invested IDR 500 billion for component manufacturing facilities in Karawang (covering engine test stands, crankshaft and connecting rods). Currently, HPM's car factory can produce up to 120,000 units per year. This figure is expected to rise to 200,000 in 2017 amid the company's expansion plans. The carmaker produces the popular low multipurpose vehicle (MPV).

The MPV is the most popular car in Indonesia. Indonesians love this model, known as "people carriers", as these vehicles are bigger than the family car. Indonesians enjoy taking trips with the family (and/or friends) and therefore a big car is required. The MPV can carry up to seven passengers and, thus, meets this request. The MPV that is manufactured by HPM has a high degree of local content. Approximately 86 percent of the cars' materials are sourced domestically.

Automotive Factories in Indonesia:

Location Company Production
Karawang Toyota Motor Manufacturing Indonesia 250,000
Karawang Astra Daihatsu Motor 200,000
Karawang Isuzu Astra Motor Indonesia  80,000
Karawang Honda Prospect Motor 200,000
Bekasi Suzuki Indomobil Motor 270,000
Bekasi Mitsubishi Motors Corporation 160,000
Bekasi Wuling 120,000
Purwakarta Nissan Motor Indonesia 250,000
Purwakarta Hino Motor Manufacturing Indonesia 75,000
Sunter Astra Daihatsu Motor 330,000
Sunter Gaya Motor  40,000
Pulo Gadung Fuso-Mitsubishi 150,000
Gunung Putri Mercedes Benz Indonesia  20,000

The reason why HPM selected Karawang as location for its factories is purely due to the location's strategic strength: good connectivity reduces logistics costs. As HPM does not export any cars yet, it is focused on domestic sales (the company does export its car components, mainly to ASEAN countries).

Meanwhile, Imam Choeru Cahya, Group Head MMC Sales Group Krama Yudha Berlian Motors (KTB), said his company is nearly finished building a new factory in Bekasi. KTB is the official distributor for Mitsubishi vehicles in Indonesia. The plant is expected to become operational by April 2017 and will produce the Pajero Sport vehicle with a production capacity of 160,000 units per year.

Nandi Julyanto, Director of Production at the Karawang plant of Toyota Motor Manufacturing Indonesia (TMMIN), said his company selected Karawang for its factory because the location has great strategic strength and there are wide land banks available. This is important because car manufacturers need a lot of space to park their output. Moreover, over the past two decades there emerged a number of car component suppliers in this region, hence making it easier to coordinate the flow of goods between factories.

Jongkie Sugiarto, Chairman of the Indonesian Automotive Industry Association (Gaikindo), said the region east of Jakarta has been chosen by many car manufacturers for their production base since a decade ago as the area's infrastructure is good (including the supply of electricity, gas and menpower). He added that it has now become difficult to find large-sized land for new factories due to the influx of many businesses over the past years. Moreover, land prices have soared over the years.

With a population that numbers 255 million people and per capita car ownership still low, Indonesia is the biggest car market in the ASEAN region (although in terms of car production Thailand remains the region's clear leader). Fandy emphasizes that the government needs to focus on infrastructure development to make Indonesia's automotive industry more competitive. It is also important that the nation's inflation and interest rates are low in order to boost people's purchasing power. With the right macroeconomic environment, investors will continue to invest heavily in Indonesia's automotive industry in the next five years, Fandy says.

Read more: Overview & Analysis of Indonesia's Automotive Industry

Amid the economic slowdown, car sales in Indonesia declined over the past three years. However, a rebound may occur in 2016. According to the latest data from Gaikindo, Indonesian car sales totaled 874,703 units in the first ten months of 2016, up 2.5 percent (y/y) from 853,089 cars in the same period one year ago.

Indonesian Car Sales (CBU):

 Month    Sold Cars
   Sold Cars
   Sold Cars
   Sold Cars
   Sold Cars
 January      76,427      96,718     103,609      94,194      85,003
 February      86,486     103,278     111,824      88,740      88,208
 March      87,917      95,996     113,067      99,410      94,093
 April      87,144     102,257     106,124      81,600      84,770
 May      95,541      99,697      96,872      79,375      88,567
 June     101,746     104,268     110,614      82,172      91,498
 July     102,511     112,178      91,334      55,615      61,893
 August      76,445      77,964      96,652      90,537      96,291
 September     102,100     115,974     102,572      93,038      93,156
 October     106,754     112,039     105,222      88,408      91,846
 November     103,703     111,841      91,327      86,938
 December      89,456      97,706      78,802      73,264
 Total    1,116,230
   1,208,019    1,013,291


     2008    2009    2010    2011     2012     2013     2014     2015
Car Sales
(car units)
 607,805  486,061  764,710  894,164 1,116,230
1,229,916 1,208,019 1,013,291
Car Exports
(car units)
 100,982   56,669   85,769  107,932  173,368  170,907  202,273  207,691

Source: Gaikindo