Units of Mitsubishi & L’Oreal Open Factories in Indonesia

Mitsubishi Motors Krama Yudha Indonesia, a partnership between Japan-based Mitsubishi Motors and Indonesia-based Krama Yudha started construction of its new car factory on a 30-hectare plot of land in the Greenland International Industrial Center in Cikarang. This USD $502 million plant, which is designed to have a production capacity of 160,000 units per year, will produce small multi-purpose vehicles, the new Pajero (sport-utility vehicle), and the popular Colt L300 pick-up trucks.

The factory, which is expected to start production in April 2017, is estimated to create about 3,000 jobs in the Cikarang region. This Cikarang plant will become the next production hub for Mitsubishi after its Laem Chabang Plant in Thailand.

The new plant in Cikarang will become Mitsubishi’s second facility in Indonesia. The Japan-based company also partners with Krama Yudha Tiga Berlian Motors.

Takeshi Ando, Head Officer of Production Group Headquarters at Mitsubishi Motors, said that the company will manufacture new seven-seat multi-purpose vehicles in the new factory.

Primary reason for Mitsubishi to expand its business activities in Indonesia is the huge potential for growth in the ASEAN region, especially in Indonesia, amid rising per capita GDP in combination with low per capita car ownership. Osamu Masuko, Chairman of the Board and CEO of Mitsubishi, expects that car demand in Indonesia will soon reach the level of Brazil, where around three million cars are sold annually. In 2014 a total of 1.2 million cars were sold in Indonesia. Masuko said that Mitsubishi aims to sell 20,000 multi-purpose vehicles in the ASEAN market and at a later stage targets to expand to markets outside ASEAN, for example Africa, South America and the Middle East. The company hopes to export about 45,000 vehicles by 2019, and provided that its car models gain popularity, the company might expand production capacity in the new factory to 240,000 units.

However, the Indonesian Automotive Industry Association (Gaikindo) expects that car sales will not accelerate yet in 2015 due to Indonesia’s sluggish economic growth, still relatively high inflation, and the weak rupiah exchange rate versus the US dollar (giving rise to expensive imports of car components). In the first two months of 2015 car sales have indeed not been good. In January car sales fell by 9.1 percent (y/y) to 94,195 units and in February by 20.6 percent (y/y) to 88,738 units.

Read Column: Car Sales Industry Indonesia - What are the Forecasts for 2015?

Indonesian Car Sales (CBU):

Month	Sold Cars 2012	Sold Cars 2013	Sold Cars 2014	Sold Cars 2015
January	76,427	96,718	103,609	94,195
February	86,486	103,278	111,824	88,738
March	87,917	95,996	113,067
April	87,144	102,257	106,124
May	95,541	99,697	96,872
June	101,746	104,268	110,614
July	102,511	112,178	91,334
August	76,445	77,964	96,652
September	102,100	115,974	102,572
October	106,754	112,039	105,222
November	103,703	111,841	91,327
December	89,456	97,706	78,802
Total	1,116,230	1,229,916	1,208,019	182,933

^{Source: Gaikindo}

Indonesian Car Sales and Exports (CBU), 2008 - 2014:

	2008	2009	2010	2011	2012	2013	2014
Indonesian Car Sales (number of car units)	607,805	486,061	764,710	894,164	1,116,230	1,229,916	1,208,019
Indonesian Exports (number of car units)	100,982	56,669	85,769	107,932	173,368	170,907

^{Source: Gaikindo}

Meanwhile, L’Oreal Indonesia (the local unit of France-based cosmetics company L’Oreal), opened its new factory in Cikarang at the start of the week. The company is eager to export its cosmetic products to new non-ASEAN markets including the USA. Currently, it ships 95 percent of its products (manufactured in Indonesia) to Southeast Asian markets, particularly Thailand. L’Oreal Indonesia opened its first factory in 2012.

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