VW to open plant in Indonesia

The Wall Street Journal reports that VW will be opening a plant in Indonesia and the first batch of cars will roll out by middle of 2010.

NEW YORK, May 7 – Volkswagen AG plans to open a new assembly plant in Indonesia with an initial investment of €35 million (RM164 million), a sign that the Southeast Asian nation's still-robust consumer spending is keeping it attractive to foreign companies.

The planned facility, an hour east of Jakarta, will begin assembling the Touran, a compact multi-purpose vehicle, and could eventually employ between 2,000 and 4,000 people, said a person with knowledge of the discussions. The Wolfsburg, Germany-based company plans to initially invest in assembly and paint operations, spending €35 million or more, and may later begin full manufacturing at the factory, its first facility in East Asia outside China, the person said.
Read more at Malaysian Insider.

VW have intentions to enter the ASEAN market since early part of this decade. Their plans however were delayed by at least 2 years due to the Proton fiasco.

Malaysian blogosphere will once again be repeating the same old failed Proton-VW merger story. This blog has no interest in engaging in that topic anymore. Enough has been said, just move on.

According to Indonesian Automotive Industry Association (Gaikindo), 60% of all 4-wheeler vehicles sold in Indonesia are MPVs. Which also means that Indonesia is the largest MPV market in the region. So it makes sense for VW to spearhead its first serious entry into the Indonesian market with a 7-seater Touran.

The Touran shown above the facelifted model, first shown in the 2006 Paris Motor Show. A second facelift is underway and is expected to be unveiled by end 2009. Word has it that the current Mk5 Golf based Touran is very costly to build and a second facelift, based on the newer Mk6 Golf is expected address this problem. There is very little difference below the skin between a Mk5 Golf and a Mk6 Golf. The major difference is in the way they are built at the plant. The Mk6 can be built faster, at a lower price compared to the outgoing Mk5 Golf. The Indonesian made Touran should be the Mk6 Golf based, second facelift model.
Image from Car.
Image from GermanCarScene.

However, don't expect the German company to mount any serious assault to the established automotive hierarchy in Indonesia so soon though. The Indonesian car market is largely dominated by Toyota. Big T's influence is so strong that I understand Gaikindo's TIV data are compiled by Toyota's local JV, PT Toyota-Astra Motor (TAM). Travel down to Indonesia and the first thing you will notice once you step out of the airport, as far as cars are concerned is that Toyota literally moves the entire Indonesia! Just like in Thailand, models like Vios, Corolla Altis, Avanza, Kijang-Innova, Fortuner, Hilux there are everywhere on every street on every corner!

The last time someone tried to break into the Avanza and Kijang-Innova duopoly is Nissan with its Grand Livina. It did make some impression but overall response was lukewarm. See the road conditions in Indonesia are pretty bad and floods are common. The impression the locals have is that only a high ground clearance and truck-based ladder frame chassis MPVs like the Kijang-Innova is tough enough to meet their daily needs.




This is why Indonesians love their Avanzas and Innovas. 4WD is not really necessary as you are not going to get stuck in mud and it's not worth putting up with the higher running cost. They just need their cars to be high. Any manufacturer who intends to attract Indonesians to their MPVs must address this point - the ground clearance and ability to wade through flood.

Having a diesel engine also helps expand their appeal to commercial applications including taxis. None of the other competitors offer a diesel engine in their MPV line-up.

The first Kijang in pick-up bodytype, 1977.
A Toyota Kijang MPV is the car that most Indonesians grew up with since 1977. Almost everyone in Indonesia knew of someone who owns a Kijang. You can't expect to beat over 30 years of recognition and brand appeal overnight.