Geely Automobile will make Indonesia a production hub for the southewast Asian region by 2015 with a 10,000-unit assembly plant, its local CEO said.
Indonesia auto sales rose 57% last year, Reuters noted.
“The market is still huge for us given the expectation of better infrastructure development,” Budi Pramono, chief executive of Geely Mobil Indonesia, told the news agency. “Geely’s strategic move is to make Indonesia as its production hub in the region to tap that market.”
Indonesia’s government has forecast car demand will reach more than 2m a year by 2020, helped by a rise in incomes on the back of a commodities boom.
Geely, which currently assembles around 2,000 cars annually in Indonesia using an Astra International factory, will set up a new plant near Jakarta with initial capacity of 10,000 vehicles per year and initial investment of $20m.
The factory will increase output to 50,000 units a year within two or three years with up to $50 million in investment, concentrating on smaller, cheaper and more fuel efficient “city cars”.
Geely currently offers four city cars, including the Panda and LC-Cross, competing with Toyota‘s Yaris and Honda’s Jazz.
Geely needed to overcome a reputation Chinese products had among many Indonesian consumers for poor performance and after-sales service, Pramono told Reuters.
“We need to fix the image that every Chinese auto brand is a bad product.”
Much of that reputation stems from a flood of cheap Chinese-made motorbikes which arrived in the early 2000s.
Having a factory in country and a large after-sales network would help address such concerns, Pramono added.
“Most of the Korean and Chinese firms only appointed distributors here and don’t want to invest in a factory or after-sales offices,” he said.