Mitsubishi Motors Krama Yudha Indonesia, a partnership between Japan-based Mitsubishi Motors and Indonesia-based Krama Yudha started construction of its new car factory on a 30-hectare plot of land in the Greenland International Industrial Center in Cikarang. This USD $502 million plant, which is designed to have a production capacity of 160,000 units per year, will produce small multi-purpose vehicles, the new Pajero (sport-utility vehicle), and the popular Colt L300 pick-up trucks.

The factory, which is expected to start production in April 2017, is estimated to create about 3,000 jobs in the Cikarang region. This Cikarang plant will become the next production hub for Mitsubishi after its Laem Chabang Plant in Thailand.

The new plant in Cikarang will become Mitsubishi’s second facility in Indonesia. The Japan-based company also partners with Krama Yudha Tiga Berlian Motors.

Takeshi Ando, Head Officer of Production Group Headquarters at Mitsubishi Motors, said that the company will manufacture new seven-seat multi-purpose vehicles in the new factory.

Primary reason for Mitsubishi to expand its business activities in Indonesia is the huge potential for growth in the ASEAN region, especially in Indonesia, amid rising per capita GDP in combination with low per capita car ownership. Osamu Masuko, Chairman of the Board and CEO of Mitsubishi, expects that car demand in Indonesia will soon reach the level of Brazil, where around three million cars are sold annually. In 2014 a total of 1.2 million cars were sold in Indonesia. Masuko said that Mitsubishi aims to sell 20,000 multi-purpose vehicles in the ASEAN market and at a later stage targets to expand to markets outside ASEAN, for example Africa, South America and the Middle East. The company hopes to export about 45,000 vehicles by 2019, and provided that its car models gain popularity, the company might expand production capacity in the new factory to 240,000 units.

However, the Indonesian Automotive Industry Association (Gaikindo) expects that car sales will not accelerate yet in 2015 due to Indonesia’s sluggish economic growth, still relatively high inflation, and the weak rupiah exchange rate versus the US dollar (giving rise to expensive imports of car components). In the first two months of 2015 car sales have indeed not been good. In January car sales fell by 9.1 percent (y/y) to 94,195 units and in February by 20.6 percent (y/y) to 88,738 units.

Read Column: Car Sales Industry Indonesia - What are the Forecasts for 2015?

Indonesian Car Sales (CBU):

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014    Sold Cars 2015
 January           76,427           96,718          103,609           94,195
 February           86,486          103,278          111,824           88,738
 March           87,917           95,996          113,067
 April           87,144          102,257          106,124
 May           95,541           99,697           96,872
 June          101,746          104,268          110,614
 July          102,511          112,178           91,334
 August           76,445           77,964           96,652
 September          102,100          115,974          102,572
 October          106,754          112,039          105,222
 November          103,703          111,841           91,327
 December           89,456           97,706           78,802
 Total         1,116,230
        1,208,019          182,933

Source: Gaikindo

Indonesian Car Sales and Exports (CBU), 2008 - 2014:

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

Source: Gaikindo

Meanwhile, L’Oreal Indonesia (the local unit of France-based cosmetics company L’Oreal), opened its new factory in Cikarang at the start of the week. The company is eager to export its cosmetic products to new non-ASEAN markets including the USA. Currently, it ships 95 percent of its products (manufactured in Indonesia) to Southeast Asian markets, particularly Thailand. L’Oreal Indonesia opened its first factory in 2012.