Hyundai to open $1.55B car factory in Indonesia

MANILA: Hyundai, the fifth largest automaker in the world, is expanding their territory yet again. This time, the company is eyeing to increase its vehicle production for ASEAN markets. Hyundai Motor Group (HMG) announced that a factory will soon rise in Indonesia, making it their first car plant in Southeast Asia.

The news came after Indonesian officials signed a Memorandum of Understanding with Hyundai. HMG Executive Vice Chairman Euisun Chung and Indonesian President Jojo Widodo were among those who attended the ceremony.

“The establishment of Hyundai Motor’s manufacturing plant in Indonesia has been made possible thanks to the continuous cooperation and support from the Indonesian government,” said Chung.

The manufacturing plant will be built on a 77.6 hectare plot of land in Kota Deltamas – an industrial city located in South Jakarta. Hyundai has agreed to invest USD 1.55 billion on the factory to cover for its construction, as well as the development costs of upcoming models.

Hyundai is planning to produce new models at the Indonesian factory, including a compact MPV, a compact SUV, and several sedans. The new vehicles will be marketed to Southeast Asian countries.

In addition to these models, Hyundai is aiming to produce ASEAN-spec electronic vehicles (EVs) at the same plant. Hyundai and its sister company, Kia Motors, are striving to become the third-largest manufacturer of EVs in the world by 2025.

“Indonesia has nickel ore, used in the production of lithium-ion batteries – an important component in electric vehicles,” Airlangga Hartarto, Indonesia’s Minister of Industry, explained.

The decision to expand to Indonesia first made headlines last June. The South Korean automaker had been struggling with prolonged sales downturn in China, forcing them to shut down two of its factories this year.

While Hyundai struggled, rivals such as Toyota, Honda, Mitsubishi, and Ford thrived in Southeast Asia as they produced cars from Thailand. Once Hyundai opens their factory in Indonesia, they will be able to penetrate the market and go head-to-head with its competitors.

The automaker will also benefit from the ASEAN Free Trade Area, allowing them to sell Hyundai vehicles for better prices in the ASEAN region.

“Hyundai will continue to listen actively and respond to the Indonesian government's expectations and policies regarding eco-friendly vehicles, while continuously contributing to the ASEAN community,” Chung added.

Hyundai’s new production plant is set to open in 2021. When it launches, it will be capable of producing 150,000 units per year. The factory is expected to reach a maximum capacity of 250,000 units per year once it goes in full swing.

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