Hyundai is set to invest US$880 million (RM3.67 billion) in Indonesia, and has plans to produce electric vehicles (EVs) in the country. This was revealed by Indonesian deputy minister for industry Harjanto, reported by Reuters.

The government official said that the planned factory will have an annual capacity of 250,000 units, including EVs. He added that the plan was to export 53% of the proposed plant’s output, mostly to ASEAN and Australia, with the remaining 47% for domestic consumption.

Hyundai – which along with Kia brand is the world’s number five automaker by sales – has not publicly commented on its plans for Indonesia, but said that it was “considering various ways to expand” in new markets including Southeast Asia. The company however said that nothing had been decided regarding new production facilities in the region.

The newswire’s report adds that Hyundai briefed South Korean union officials earlier this year about a plan to build a factory in Indonesia, according to three people familiar with the matter. One of the challenges it identified was building sales networks, the sources added. Hyundai does not have its own factory in ASEAN, although some of its vehicles are assembled in Vietnam and Malaysia.

It’s noted that Hyundai’s belated move to set up its first car plant in our region fits into the carmaker’s current strategy of reducing its reliance on China, where competition is intense and its sales have suffered from diplomatic tensions between Seoul and Beijing. Also, Indonesia has rich reserves of nickel laterite ore, a vital ingredient for the lithium-ion batteries used to power EVs.

However, ASEAN is very much dominated by Japanese carmakers who have long established their presence here, and it will be a big task for Hyundai-Kia to gain a foothold in Thailand and Indonesia. To put things in perspective, in Indonesia, Hyundai sold only 1,372 vehicles from January to October this year, compared with Toyota’s 463,565 units.

GALLERY: Hyundai Kona Electric at KLIMS 2018

GALLERY: Hyundai Ioniq Electric at BIMS 2018