General Motors Co and partner SAIC Motor Corp. plan to build and sell low-cost minivans in Indonesia.
On Monday, the auto makers said in separate statements that SAIC-GM-Wuling Automobile Co., a joint venture between GM China, SAIC and Wuling Motors, will set up a manufacturing facility near Jakarta to build Wuling-brand vehicles. Construction will begin later this year. They also said the vehicles will be sold primarily in Indonesia, though they could export to other markets in the Association of Southeast Asian Nations in the future.
This isn't the first GM-SAIC foray outside China. In 2010, as GM was still limping out of bankruptcy, the U.S. auto maker agreed to a 50-50 joint venture with SAIC in India, with a goal of expanding into Southeast Asia and other emerging markets.
Although GM and SAIC have long talked about an expansion of their collaboration beyond tie-ups in China and India, there has been little progress. The GM-SAIC partnership in India also fell off. SAIC nearly reversed that investment in 2012 by cutting its stake to 9% after the joint venture struggled.
SAIC owns a 50% stake in SAIC-GM-Wuling, China's largest minivan maker by sales, and GM owns 44%. The rest is owned by Wuling Motors, a relatively unknown producer of microvans in Liuzhou, an industrial hub in the southern Chinese province of Guangxi.
Wuling began to build mini farm trucks in the 1960s and entered a segment that has come to be known as minicommercial vehicles, or microvans, in the mid-1980s with technological assistance from Japan'sMitsubishi Motors Corp. (7211.TO) and Daihatsu Motor Co. (7262.TO). SAIC invested in Wuling in 2001, and GM invested the following year, according to the website of SAIC-GM-Wuling.
GM and SAIC have helped Wuling improve what were spartan workhorse vehicles used primarily by farmers and small shop owners. They provided technology and made them more reliable and durable.
The move has paid off, thanks to robust demand among less-wealthy people in China's rural areas. Sales of minivans by SAIC-GM-Wuling in the Chinese market rose 8.4% to more than 1.6 million units last year, accounting for about half of all the vehicles that GM sold in China, according to GM China data. Wuling's minivans usually sell for about 50,000 yuan($8000).
Funds for the investment will be provided by both SAIC and SAIC-GM-Wuling, SAIC said, without providing further details.
In a report Friday, Indonesia's state Antara news agency quoted local officials as saying the total investment will be worth about $700 million. The factory will have a manufacturing capacity of 150,000 vehicles a year when production commences in 2017. Neither GM nor SAIC confirmed those details.
In 2014 in Indonesia, car sales totaled 1.21 million units, down 1.8% from a year earlier, according to data from the Indonesian Automotive Industry Association, which cited the slowing economy and political uncertainty. But car makers are still jostling for market share.