Lowering of tariffs and other barriers to exports boosts ASEAN automotive investment

The USA's General Motors Co will reportedly re-establish its presence in Indonesia, a surging market dominated by Japanese auto makers. According to a Wall Street Journal source, GM intends to build a plant near Jakarta capable of producing about 50,000 vehicles a year, with plans to turn it into a major production base to export cars cheaply to the rest of the South East Asian market.

Historically, much of the region's auto investment has flowed to Thailand, which used reliable infrastructure and incentives to lure auto makers. GM currently operates a vehicle plant in Thailand and is gearing up its manufacturing presence there by adding an engine factory.

But Indonesia has become more attractive in recent years because of its domestic market of more than 240 million people and as high commodity prices boost income in the archipelago.

"The lowering of tariffs and other barriers to auto exports with the 10-member ASEAN this year has also helped persuade more companies to invest in Indonesia," said the newspaper.

According to Michael Dunne, an auto analyst who lives in Jakarta, car sales in South East Asia, home to more than 500 million people, are expected to hit 2.2 million vehicles this year, increasing to 2.7 million vehicles a year by 2015. Demand in Indonesia alone will likely total as many as 900,000 vehicles this year, making the country the largest and fastest-growing market in the region, he said.

Japan's Toyota Motor Corp will boost annual output capacity at its Karawang plant in Indonesia to 140,000 vehicles from the current 100,000 by early 2013. Toyota minicar unit Daihatsu will also set up a second plant in Indonesia. Hyundai Motor Co of South Korea is considering the possibility of opening a car-assembly plant in South East Asia and has looked at Indonesia as a potential site.