Hyundai Signs W2 Trillion Plant Deal with Indonesia

Published on 2019/12/01 | Source

Hyundai chief Chung Eui-sun (center left) talks to Indonesian President Joko Widodo (center right) at the automaker's plant in Ulsan on Tuesday.

Hyundai will invest about W2 trillion in Indonesia to build a car plant with an annual capacity of 250,000 vehicles (US$1=W1,178).

Hyundai chief Chung Eui-sun signed the investment contract with Indonesian President Joko Widodo in Busan on Tuesday.

The Indonesian government will provide Hyundai with a variety of incentives, including tax benefits. Indonesia has been keen to lure investment from Hyundai because it is unhappy with Japanese cars taking up a whopping 97 percent of its market.

The plant will be built in the Deltamas industrial park 40 km outside Jakarta, and Hyundai will spend US$1.55 billion in total by 2030 including development and operation costs.

The company will break ground next month with a view to producing 150,000 cars a year by late 2021 and increase capacity to 250,000 vehicles later.

Chief models include compact SUVs and MPVs, and EVs, which Hyundai is developing with the Southeast Asian market in mind.

About a half of the cars produced there will be sold in Indonesia and the other half will be exported to Australia, Philippines, Thailand, Vietnam, and the Middle East.

Japanese companies have a strong supply and sales network there and are very popular among South Asian consumers, so Hyundai will have an uphill struggle.

"It's possible to fail in the Southeast Asian market if you don't win the hearts of local consumers, no matter how good your products are", said Prof. Kim Ki-chan of the Catholic University of Korea said. "Hyundai needs to come up with marketing strategies appealing to local people as well as developing products that meet their needs".