Hyundai Motor Co., South Korea's largest carmaker, has signed a business deal to set up a commercial vehicle joint venture with the tenth largest business group in Indonesia to tackle the Southeast Asia market. It is part of its strategy to meet the demand of rapidly growing Association of Southeast Asian Nations (ASEAN) markets through local production.
Hyundai Motor announced that it has signed a joint venture agreement with Indonesia’s Artha Graha (AG) Group at the Indonesian embassy in Yeouido, Seoul, on December 12.
The two companies will set up a commercial vehicle joint venture in Jakarta, Indonesia, in May next year. The new joint venture will not only be responsible for assembly but also for sales and after-sales service. Fully disassembled key parts, such as engine and transmission, shipped from Hyundai Motor’s Korean plants will be assembled by the joint venture in a Completely Knocked Down (CKD) form. The joint venture will produce 2,000 heavy-duty Xicent and medium-duty New Mighty trucks annually from late next year, with a plan to gradually add new models according to the demand in the Indonesian market.
The Indonesian commercial vehicle market is expected to grow to 100,000 units in 2020, up from the 76,000 units last year. Currently, Japanese carmakers, such as Toyota, Daihatsu and Honda, account for more than 90 percent of the Indonesian commercial vehicle market, as they have operated local assembly lines since the 1970s.
The new joint venture in Indonesia will also play a role as Hyundai Motor’s outpost for the Southeast Asian market invasion. Southeast Asian countries impose 30 to 80 percent of tariffs on South Korean complete vehicles. However, products manufactured in Indonesia can be exported to member countries free of duty according to the ASEAN Free Trade Area (AFTA).
Meanwhile, the joint venture agreement came after President Moon Jae-in announced the New South Policy during the South Korea-Indonesia business forum on November 9. The initiative aims to expand economic cooperation and personnel exchanges between South Korea and Southeast Asian nations. The signing ceremony was attended by not only officials from the two companies but also government officials from the two countries, including Moon Seung-wook, director general of the Ministry of trade, industry & energy of Korea, Indonesian Ambassador to South Korea Umar Hadi and Triawan Munaf, head of Indonesia's Creative Economy Council.