Toyota to raise the annual capacity at its plant in Indonesia

Article by Christian A., on February 12, 2012

With hopes of keeping up with growth in Indonesia (Southeast Asia's top economy), Toyota has decided to raise the annual capacity at its Karawang plant in Indonesia by 50,000 cars to 120,000 cars, according to a senior official. Toyota has informed Reuters last Wednesday that it will make an additional investment of JPY15 billion ($195.11 million) in the facility.

The Kijang Innova compact MPV and the Fortuner SUV are produced at the Karawang plant intended for the domestic market and export markets like Thailand and South Africa.

In 2011, Indonesia’s domestic car sales reached a record 894,180 units, about 16.9 percent higher than the previous year. This was aided by the lowest ever interest rate and an expanding middle class.

Leonardo Henry Gavaza, an analyst at Bahana Securities in Jakarta, said that as many automakers want to substantially increase their capacity, it’s suggested that the industry is “bullish about Indonesia's automotive market."

Gavaza said that Indonesia's domestic car sales have exceeded those of Thailand in 2011. This helps explain the increase in direct investment in the sector. He added that car sales in 2012 would probably be flat or lower than in 2011 due to the higher base.

However, sales should hit 1 million cars in 2012 and 8.8 million motorcycles if the government withdraws its plan to increase fuel prices as well as a separate plan to raise the down payment rate for car loans by 30 percent.

Japanese carmakers led by Toyota control more than 90 percent of the Indonesia market that boasts of having the fourth-largest population in the world. Vehicles sales in Indonesia are estimated to increase by more than 50 percent in five years as the expanding working class is asking for minivans and compact cars.

Toyota Motor Corp. has slashed its full-year profit for 2011 forecast by 54 percent, no thanks to the drop in output of Camry and Prius units as caused by the floods in Thailand. The floods in the country resulted to parts shortages, thereby disrupting production around the world. Toyota said that in the fiscal year ending March 31, 2012, its net income is expected to plummet by 56 percent to EUR180 billion ($2.3 billion). This profit figure is more conservative than half of the average profit estimated by 21 analysts as compiled by Bloomberg.

Aside from a 56-percent drop in net profit, Toyota also expects its operating profit and sales to drop in the fiscal year ending March 31, 2012. Toyota said that the disaster in Thailand will slash around JPY120 billion from its earnings, which is more than 40 percent of the losses resulting from the earthquake in Japan in March 2011.

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