Mitsubishi Fuso is in the process of upgrading its engine plant in Indonesia to build a new range of commercial vehicle engines that meet Euro II emissions standards.

The investment, which is expected to total around US$50m, is in response to tightening emission legislation in the country. By 2007, all vehicles produced in the country will be required to comply with Euro II.

PT Krama Yudha Tiga Berlian Motors (KTB), the local distributor of Mitsubishi passenger and commercial vehicles, sold its 1.5 millionth vehicles in Indonesia in September after 35 years of operating in the country.

The investment in the engine plant of PT Mitsubishi Krama Yudha Motors and Manufacturing, which is majority-owned by Mitsubishi group companies in Japan, is expected to be completed in 2006 and capacity will continue to be focused on domestic products.

KTB also unveiled a new addition to its passenger vehicle line-up, the Maven compact utility vehicle based on the Suzuki APV. The Maven is fitted with the 1.5L Mitsubishi 4G1 multi-point injection engine, which is also fitted to the Suzuki-based Mitsubishi T120SS light commercial vehicle. KTB hopes to sell 12,000 Mavens annually, with a retail price of between Rp104m and Rp118m.

KTB is targeting sales of 100,000 vehicles this year and by the end of September was estimated to have sold 84,000 units – equivalent to around 19% of the total vehicle market. The domestic vehicle market expanded by 26.1% in the first nine months of 2005 to 439,804 units, although the rate of growth has started to slow.

High oil prices have begun to have a material impact on the economy, forcing the government to reduce fuel subsidies dramatically and to raise interest rates to stabilise the rupiah. Interest rates have been increased four times since August, rising from just over 8% to 11%. Fuel prices were increased by an average of 126% at the beginning of October. Petrol and diesel prices have almost trebled since last year and annual inflation is estimated to be in double-digit figures.

Last month KTB’s marketing director, Riswan Alamsjah, said he is confident of meeting this year’s sales target, but admitted he is more cautious about the outlook for 2006. He added that vehicle sales could actually fall, by as much as 10% or more, in response to tightening monetary policy.

Tony Pugliese