By I Made Sentana and Ben Otto
JAKARTA, Indonesia-- Suzuki Motor Corp.'s Indonesian operation
will begin exporting a new motorcycle model to as far as Europe, a
further sign that Japanese auto giants are looking to Southeast
Asia's largest economy to build sales in the region and beyond.
Suzuki's Indonesian joint venture announced Friday that it would
begin exporting Address scooters to Southeast Asia, Japan, Europe,
Australia and New Zealand. The shipments, made along with its
partner in the country, PT Indomobil Sukses International, will be
Suzuki's first exports of Indonesia-made motorcycles to Japan,
Europe, New Zealand and Australia.
Other automotive giants like Toyota Motor Corp. are also working
to expand exports from Indonesia, where economies of scale have
grown enough that companies say some factories are now more
cost-competitive than in Thailand, the region's traditional hub and
export base for global auto makers.
Last year, Indonesia overtook Thailand as the region's largest
auto market by sales, with political instability cutting sales in
Thailand to well below 900,000 units, compared with Indonesia's
total of more than 1 million, according to consultancy LMC
Automotive. Indonesia already was Southeast Asia's largest
motorcycle market by far, hitting nearly 8 million units in sales
last year.
Indonesia's car production of almost 1.3 million cars--the vast
majority for domestic sale--in 2014 was well behind almost 1.9
million in Thailand, the region's exports leader.
"In the past, we used to give more importance to Thailand, but
maybe the situation is changing," Motoo Murakami, regional managing
officer with Suzuki, told The Wall Street Journal. "More volume in
Indonesia, more cost competitive. This means we can produce cheaper
and more economically than in Thailand."
Companies like Toyota, Suzuki, and Mitsubishi, as well as
competitors from the U.S. and China, are also expanding in
Indonesia, drawn by an economy growing at better than 5% a year and
population of 250 million people whose incomes are rising. More
than half of Indonesian households lack a car, compared with just
7% in Malaysia, according to consumer-data provider Nielsen.
Japanese auto makers that produce in Indonesia, which have a
greater than 90% share of Indonesia's car market, are investing $7
billion from 2014 to 2018, according to Johnny Darmawan, a director
of the Association of Indonesia Automotive Industries, or Gaikindo.
In the past two years, total foreign investment in Indonesia's
automotive and transportation products sector has totaled almost
$5.8 billion, according to the country's investment agency.
Toyota is working on a new engine factory that will open next
year and double the company's production capacity, with about half
of the new factory's engines going for export. Suzuki is spending
$1 billion from 2014 to 2018 to build new motorcycle and
car-manufacturing facilities.
General Motors this week said it would shut its Indonesia
factory after failing to get a foothold in the small minivan
market, but it is taking another shot through a joint venture with
China's SAIC Motor Corp. to produce a vehicle under the Wuling
brand. Gaikindo said the moves will result in a net addition to the
country's production volume.
Meanwhile, GM said Friday that it will cease production of the
Chevrolet Sonic passenger car in Thailand by June as part of a
sweeping restructuring of its operations in the nation. Stefan
Jacoby, head of GM's international operations, said in a statement
that the decision was part of a larger global strategy aimed
long-term sustainability for the company. "We are focusing our
investments where the opportunity for GM's growth is greatest," he
said.
Even Proton, the beleaguered, one-time state auto maker of
Malaysia, whose sales are flagging at home, last month said it is
considering a tie-up in Indonesia to export its cars here, possibly
even producing a new Indonesian car.
All told, that expansion is expected to boost production
capacity by more than a third to 2 million vehicles by 2018, said
Soebronto Laras, president commissioner of Indomobil.
"Indonesia will overtake Thailand in production," and someday
exports, too, Mr. Laras said.
For the time being, Thailand still has some key advantages over
Indonesia.
Creaking infrastructure in Indonesia remains a huge constraint,
with today's ports inadequate for a major ramping up in exports,
said Jessada Thongpak, an automotive sector analyst with IHS in
Bangkok.
"Look at the insufficient roads, too. This is a roadbump for the
expansion of the automotive market" in Indonesia, he said.
Mr. Murakami said the European Union provides "very
preferential" import taxes for Thailand. "Indonesia is a bit
behind," he said.
Mr. Darmawan, who is also a director of PT Astra Internasional,
Toyota's local partner, said that, overall, Indonesia was on the
right track, pointing to Toyota's decision years ago to make
Indonesia its hub for some products.
In the past, "Thailand offered some factors that made (auto
makers) excited," he said. "Now Indonesia has opened itself."
Colum Murphy in Shanghai contributed to this article.
Write to I Made Sentana at i-made.sentana@wsj.com and Ben Otto
at ben.otto@wsj.com
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