PT Denso Indonesia, a joint venture between Denso International Asia Pte. Ltd. and PT Astra Otoparts, will officially launch operations at its automotive components factory, built with overall investment of
Rp 1.4 trillion (US$107.89 million), next month.
The plant, which is located in Bekasi, West Java, will initially produce 10 kinds of autocomponent, including spark plugs, starters, engine control units and speed control units, according to director A. Hartoyo. Around 70 percent of the output generated from Denso’s third facility will be sold in the domestic market, with the remainder set for export.
“We have secured purchase contracts from our consumers, nearly all of whom are car manufacturers in Indonesia,” Hartoyo told reporters after meeting Industry Minister Saleh Husin.
The largest proportion of production would be dedicated to spark plugs, which can reach 7 million units each month and are to be shipped to countries in Asia, America and Europe, while other products would follow market demand, he added.
Denso currently operates two plants in Sunter, North Jakarta, and Bekasi, West Java, manufacturing a wide array of automotive components, such as air conditioners, radiators, spark plugs and filters for major two-wheeler and four-wheeler makers, including PT Toyota Motor Manufacturing Indonesia (TMMIN), PT Astra Daihatsu Motor (ADM), PT Astra Honda Motor (AHM), PT Honda Prospect Motor and PT Suzuki Indomobil Motor (SIM).
The company already exports products overseas, including to Japan, the United States and Europe.
Denso has spent up to Rp 600 billion to develop its new plant since the end of 2012 and further expansion is expected to reach completion by 2018.
Hartoyo said that despite expected slowdown in Indonesia’s car sales this year, the firm anticipated a rebound in the future, and so would continue its plans to expand.
“Even if the market weakens, our investment will not stop. We are advancing, so that when the market climbs, we will be ready to tap into available opportunities,” he said.
Car sales, an indicator of domestic consumption in Southeast Asia’s biggest economy, have dipped by 1.8 percent to 1.21 million in the past year, the first drop in five years after robust annual sales that analysts described as an “automotive boom”.
Along with shrinking car sales, Denso saw sales of its automotive components decline by 20 percent last year.
The Association of Indonesian Automotive Manufacturers (Gaikindo) estimates that vehicle sales will remain at 1.2 million this year on weakening purchasing power despite falling prices of fuel due to an oil glut in the global market.
Industry Ministry director for land transportation vehicles Soerjono said that investment in automotive components might slow this year in line with stagnant growth in auto sales. However, he added, in the long run, sales would still be robust for low-cost green cars (LCGC).
“That’s why we strongly encourage investors to enter production of components for LCGC. It is now the most attractive sector and also a global product that we can export easily,” he said.
The autoparts industry generates a significant multiplier effect, with a firm like Denso able to absorb supporting materials from 200 to 250 suppliers.