Desperate for a Breakthrough
The Hyundai Motor Group is planning to build a car manufacturing plant with an annual production capacity of 200,000 vehicles in Indonesia as it desperately needs a breakthrough amid a slowing business in the United States and China. Earlier, Beijing Hyundai Motor said that it might export some of its production to Southeast Asia.
The automobile market in Indonesia is growing rapidly. In addition, under the ASEAN Free Trade Agreement (AFTA), a zero percent tariff is applied to automobile exports and imports among ASEAN member countries from this year, meaning that tariff-free exports are possible from Indonesia to neighboring countries like Vietnam. A total of 4.8 million cars are expected to be sold in the ASEAN region, which is expected to become the sixth-largest market in the world in 2020.
Hyundai’s plan has to do with President Moon Jae-in’s New Southern Policy as well. These days, the South Korean government is encouraging companies to start or expand their business in Indonesia, Myanmar, Vietnam and other Southeast Asian countries. President Moon visited Indonesia in November last year and signed a memorandum of understanding for more cooperation in key industries.
The Indonesian government already promised to cooperate with Hyundai by providing tax incentives and other benefits. It is expecting that Hyundai’s presence in the Indonesian car market will have a positive effect in terms of employment and exports and help it address local market lopsidedness. At present, Japanese and German automakers account for close to 79% and 20% of the local sedan market, respectively.