French car maker Renault SA is looking at starting production in Indonesia, while other car manufacturers plan to step up their existing operations, a government official told Reuters.
Indonesia is keen to compete with Thailand as the region's centre for car production, catering to a regional market of about half a billion increasingly affluent consumers.
Investment by the world's top auto manufacturers would help create new jobs and spur growth in Indonesia's economy, which is set to expand 6.3 percent this year, the fastest pace in 11 years.
A government official, who declined to be named, told Reuters that Renault has short-listed Indonesia and one other country as potential sites for new production facilities.
In addition, Japan's Toyota Motor Corp plans to increase production in Indonesia, the official said.
Earlier this month, another Japanese manufacturer, Daihatsu Motor Co, said it had invested about $130 million to increase the annual capacity of its existing plant in Jakarta by more than 40 percent in order to meet growing domestic demand and produce for the export market.
Renault plans to invest $600 million in a new factory with the capacity to produce 150,000-200,000 vehicles a year for the domestic and export markets, according to Bisnis Indonesia newspaper, quoting Indonesia's investment coordinating board, Muhammad Lutfi.
Renault set up dealerships in Indonesia several years ago, but its sales volume is low as its products are more expensive than those of its Japanese rivals, which have production bases in Southeast Asia's largest economy.
Last year, Renault sold only 19 vehicles, a tiny fraction of the total 318,883 units sold in Indonesia, according to industry data. Renault's alliance partner Nissan Motor Co has a stronger presence, with a market share of around 4 percent.
Japanese car makers including Toyota -- which makes the Kijang, Indonesia's most popular car -- as well as Nissan, Honda, Daihatsu, Mitsubishi, and Suzuki have dominated Indonesia's automotive industry with a total market share of nearly 90 percent.
Car sales are rebounding this year after a reduction in fuel subsidies in 2005 led to higher fuel costs for consumers and prompted a sharp drop in car sales in 2006.
Thanks to a steady decline in interest rates over the past 18 months, domestic consumption has picked up. Vehicle sales are expected to top 400,000 units this year, and next year are forecast to exceed the record set in 2005 of 533,910 units.
(source : reuters)