Hyundai is expanding its empire, planning a new factory in Indonesia for making EVs

KUALA LUMPUR: The Indonesian deputy minister has said that Hyundai is all set to make an investment of $880 million (RM3.67 billion) in the country’s automotive industry. The plan is to open a new factory that will have an annual capacity of producing 250,000 units including electric vehicles.

Hyundai has not released any official statement in reply to this information. However, it is quite likely to turn out to be true. Hyundai has been considering different ways to expand its empire in new markets including Southeast Asia. This new factory would help the Korean brand to reduce its dependency on China where it has to face tremendous competition. It has seen a decline in sales because of the diplomatic tensions between Seoul and Beijing.

Hyundai, along with Kia brand, is the world’s number five automaker by sales. Some of its vehicles are assembled in Vietnam and Malaysia but it doesn’t have its own factory in ASEAN. Setting up a new factory will not be an easy task. One of the challenges that Hyundai would need to face is building sales networks.

Hyundai would also need to have in mind that the ASEAN is largely dominated by Japanese car brands like Toyota who have been in the region for decades and hence have a strong grip in the market. Consider the fact that in Indonesia, Hyundai sold only 1,372 vehicles from Jan 2018 to Oct 2018, and Toyota sold 463,565 units in the same time. Therefore, creating space for itself would be a bit cumbersome.

Indonesia has rich reserves of nickel laterite ore, a vital ingredient for the lithium-ion batteries used to power electric vehicles. This way setting up an electric car manufacturing plant would help Hyundai in many ways. According to the Indonesian deputy minister, Hyundai plans to utilize the factory to export 53% of the proposed output, mostly to ASEAN and Australia, with the remaining 47% for domestic use. However, Hyundai says that nothing had been decided regarding new production facilities in the region.