Volkswagen LogoAt first, the figure was said to be about US$47 million, but the latest is a whopping US$140 million! It’s heartbreaking I know but yes, we’re talking about Volkswagen’s investment in Indonesia to build an assembly plant there that will first only have CKD assembly and paint shops, but will later become a full fledged manufacturing plant complete with stamping and the whole works, if all goes well!

Indonesia’s Investment Coordinating Board head Muhammad Lutfi has revealed that US$140 million will be invested over the next 2 years on the 50,000 Touran a year factory, and the Indonesian government will support them with tax incentives.

Lutfi added that MPV manufacturing in Indonesia is on average 30% cheaper than any other ASEAN countries because of government incentives. Toyota and Honda also makes their MPVs there (remember the Toyota IMV project?), with the latest being the Honda Freed, which is being assembled at Honda’s plant in Karawang.

More and more automotive companies may be looking at Indonesia soon. Four Chinese brands have entered Indonesia in the last 2 years – Chery, Foton, Great Wall and Geely. Their economy is forecasted to grow 4% this year, and they are said to be the 3rd fastest growing economy in Asia after China and India. It’s also the world’s fourth-largest country by population.

Astra

Indonesian citizen earnings are slowly rising to point where a majority can abandon their motorcycles for cars, and proof of that is in the increasing gridlock problem in Jakarta. The buses and taxis share the same jam and there is no MRT. The first will only begin construction in 2011 and operational by 2016.

You can also look at P.T. Astra International’s stock prices and earnings – they are a large automobile conglomerate in Indonesia and have partnerships with Toyota, Daihatsu, BMW, Peugeot, Nissan Diesel, Isuzu, and Honda.

Previously a Volkswagen spokesperson said their Indonesian vehicle assembly plant is a first step towards Volkswagen’s long term ASEAN market development. Volkswagen can also use their Indonesian plant to supply CKD kits or complete vehicles to Japan, thanks to the Japan-Indonesia Economic Partnership Agreement.

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