Investment in Indonesia's Automotive Sector: Nissan's New Plant
Nissan Motor Indonesia (NMI), the Indonesia-based local unit of Japanese multinational automobile manufacturer Nissan Motor Company Ltd, started construction of a new engine and transmission parts plant in Purwakarta (West Java). The plant, which will be constructed at NMI's existing facilities in Purwakarta, covers 3,000 of square meters in size and requires an investment of around IDR 435 billion (approx. USD $33.2 million). The plant is designed to have a production capacity of 96,000 units per year.
Antonio Zara, President Director of Nissan Motor Indonesia (NMI), said the new factory should become operational in September 2017. Zara added that the Indonesian market forms one of the most strategic markets for Yokohama-headquartered Nissan and therefore this investment in Purwakarta is important for overall growth of the Japanese car manufacturer. Nissan started to invest in Indonesia in 2001.
Fumitoshi Yoshikawa, Vice President Director at NMI, said the construction of this new engine and transmission parts plant will support further development of Indonesia's automotive industry as a whole. The new plant will produce products in accordance with the global standard of Nissan.
Per July 2016, sales of Nissan in Indonesia reached 8,796 vehicles so far this year. Meanwhile, sales of Datsun (an automobile brand owned by Nissan) reached 20,981 units in the same period. As such, Nissan forms a relatively small player in Indonesia's automotive industry, an industry that is dominated by Astra International (controlling nearly 60 percent of the market) with its Toyota, Daihatsu, and Isuzu brands.
Sales of Nissan fell 25 percent (y/y) to 25,108 vehicles in full-year 2015. This decline continued more severely in the first seven months of 2016. Sales of Nissan vehicles in Indonesia plunged 48.3 percent (y/y) to 8,784 units in the January-July 2016 period. Nissan's market share in Indonesia is currently less than 2.5 percent. The directors of NMI did not elaborate on these plunging sales. However, they did inform that in the next couple of years NMI targets to control 8 percent of the Indonesian market.
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Zara also informed that Nissan will not launch any new models this year in Indonesia. However, next year the company will launch several new models on the Indonesian market, particularly in the crossover utility vehicle segment (a popular car type in Indonesia).
Indonesia remains a very attractive market for car manufacturers even though car sales have declined since 2014. This decline was caused by the country's economic slowdown (resulting in weakening purchasing power and sliding consumer confidence). However, on the middle and long term the potential remains high as there are many Indonesians who do not own a car. It is estimated that there are only 70 car for every 1,000 Indonesians, implying a very low per capita car ratio (the total population numbers more than 255 million people). Therefore, in combination with rising per capita GDP (as economic growth is expected to accelerate) Indonesia forms a great market.
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