Mitsubishi Bets on New $632m Plant to Tap Indonesia's Thriving Crossover Market

Japanese automaker Mitsubishi Motors is set to start operations at a new plant in Cikarang, West Java, in the second quarter of next year. (Reuters Photo/Thomas Peter)

By : Ridho Syukra & Harso Kurniawan | on 4:58 PM October 23, 2016
Category : Business, Featured, Automotive

Jakarta. Japanese automaker Mitsubishi Motors is set to start operations at a new plant in Cikarang, West Java, in the second quarter of next year, providing the company with a manufacturing base to tap Indonesia's fastest growing automobile market segments.

The $632 million plant will start in April to produce sports utility vehicles and so-called crossover vehicles, which combine off-road capability with a passenger-carrying capacity in multipurpose vehicles, which are currently the best-selling vehicle type in Indonesia. The plant will have a capacity to produce 160,000 units per year, half of which would be crossover vehicles.

Irwan Kuncoro, general manager of sales and marketing at Krama Yudha Tiga Berlian Motor, the authorized sole distributor for Mitsubishi, said on Friday (21/10) that the automaker is seeking to become part of the big three in terms of domestic sales with the introduction of its crossover vehicle.

Japanese automaker Toyota currently dominates the Indonesian car market with a 35 percent market share, followed by Honda with 19 percent and Daihatsu with 17 percent. Mitsubishi only accounts for 4 percent of the market.

Sales of crossover vehicles exploded in the first nine months of this year compared to the same period a year ago, growing at 65 percent. This was led by the likes of the Honda BR-V and Mitsubishi's Outlander. The aggregate growth for all cars in the same period was 2.5 percent.

"The mindset of Indonesian consumers about cars is that the vehicle has to be able to carry seven passengers. Meanwhile, road conditions here are often far from perfect," Indonesian Automotive Association (Gaikindo) deputy chairman Jongkie Soegiharto said.

Crossover vehicle sales could boost next year's total by between 1.10 million and 1.15 million units, from an estimated 1.05 million this year, he said.

"Gaikindo does not yet have an official projection for next year's growth, but I think it would be faster than this year," Jongkie said.

Krama Yudha's Irwan said the company plans to start producing 80,000 crossover vehicles at its Cikarang plant as soon as June next year after concentrating on building Pajero sports utility vehicles in the three months prior.

Mitsubishi will also restructure its operation by transferring all passenger car sales and marketing from Krama Yudha to a new company. That will be a joint venture between parent Mitsubishi, which will control 40 percent, and Mitsubishi Motor and Krama Yudha, which will each control half of the remaining shares.

The new structure would separate Mitsubishi truck sales, under the Fuso brand, and other passenger vehicles such as the Pajero, Outlander, Mirage, Delica, and Triton, which in turn would allow for more rapid dealership expansion, Krama Yudha president director Hisashi Ishimaki said.

And that should be a justified move with competitors also planning to tap into the crossover segment next year.

Japanese rival Nissan will start selling its Datsun Go Cross next year, while French manufacturer Renault has introduced Kwid, which it claims is the cheapest crossover vehicle model in Indonesia.

Local media also reported that Toyota plans to introduce a crossover model next year to strengthen its lead in the Indonesian market.

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