Malaysia's first national automaker, Perusahaan Otomobil Nasional (Proton), is about to start car assembly in Indonesia at a new plant in the Cikarang industrial park, some 30 miles (50km) east of Jakarta.

Through PT Proton Edar Internasional Indonesia (PEI), which is a 95%-owned subsidiary of Proton Edar Sdn Bhd, the Malaysian car maker is said to have invested around $US35 million in building the assembly plant and related distribution operations, according to local sources.

PEI's president, Safiun is quoted as saying that CKD kits have begun to arrive in Indonesia and that assembly is imminent. The plant will initially build the Wira compact sedan, which will be supplied to taxi operators, but the company is also contemplating assembly of other models for private motorists in the future.

Demand for new and replacement taxis is very high at present, as the country's recovery from the 1997-987 Asian crisis continues to accelerate. There are thousands of old pre-crisis taxis still operating on Indonesia's roads in dire need of replacement. Also, taxi fares - which are regulated by the local government, were hiked by around 35% in March. The prospects for taxi operators have therefore increased significantly despite the sharp rises in fuel prices locally. The main car models currently supplied to taxi operators are the Toyota Limo (basically the Vios imported from Thailand) and the Hyundai Accent, assembly locally from CKD kits imported from South Korea.

The new assembly plant, incorporated as PT Proton Tracoma Motors, is a joint venture between Proton Holdings Bhd and Malaysian parts supplier Tracoma Holdings Bhd, each with 51% and 49% of the equity respectively. The plant is said to have a production capacity of 50,000 units per year and initial orders for 5,000 Wiras.

The plant is expected to assemble the Gen2 and the Arena passenger cars at a later date, according to sources close to the company - including for export to countries such as Thailand and the Philippines.

There is a lot of scepticism regarding Proton's low key return to Indonesia. The Malaysian firm supplied its aged Saga model to taxi firms in Indonesia in the mid-1990s and its image among consumers is currently very poor. There will need to be significant investment in marketing and brand re-building if Proton is to succeed in this country.

Proton is facing intensifying competition in its home market, with the Malaysian government committed to a gradual easing of market protectionism over the next several years. With limited prospect for volume growth at home, the company is being forced to improve its prospects in overseas markets.

Tony Pugliese