Ford Considers Car Assembly in Indonesia

Just the Facts:

• Ford is considering establishing a new vehicle assembly facility in Indonesia.
• Ford wants to increase its exposure to one of Asia's most promising auto markets.
• Car sales in Indonesia last year jumped 17 percent, to a record 893,000 units.

JAKARTA, Indonesia — Ford is considering establishing a new vehicle assembly facility in Indonesia, as it looks to increase its exposure to one of Asia's most promising auto markets.

Joe Hinrichs, president of Ford Asia Pacific and Africa, told reporters gathered for the Delhi Auto Expo that the company is planning to invest in an assembly plant in Indonesia in the near future.

Hinrichs said he is encouraged by the recent strong growth in Indonesian auto sales and the potential for further strong growth. "We expect Indonesia will soon overtake Thailand as the ASEAN's largest market — I cannot say when exactly," he said.

The Indonesian auto industry association Gaikindo reported a 17-percent jump in vehicle sales last year to a record 893,240 units — enough to make it the region's largest auto market in 2011. Thai full-year sales data has not yet been released, but will likely come in at around 800,000-820,000 units, with production and sales severely hampered by floods in the fourth quarter.

Ford's main ASEAN production base is in Thailand, where its AutoAlliance joint venture with Mazda makes mainly the Ranger pickup truck and the Fiesta subcompact, as well as other passenger vehicles in smaller volumes. Ford also has assembly plants in Malaysia, Philippines and Vietnam.

Ford scrapped plans to invest in an assembly plant in Indonesia in 1996 after the government launched the ill-starred Timor national-car program. While the program was discontinued soon after, at the beginning of the 1998-'99 Asian financial crisis, the U.S. automaker until now has pursued an import-only policy for this rapidly growing market.

Ford and Mazda's sales have increased sharply in Indonesia in the last two years, helped by the launch of the Thai-made Fiesta and strong demand for the Ranger. Combined volumes are estimated to have reached a record 25,000 for the two brands last year.

While plans have yet to be confirmed, Ford acknowledges that it is increasingly excited by the medium and long-term growth prospects for the Indonesian vehicle market. Gaikindo expects annual sales to exceed 1 million units in the next 2-3 years, to account for more than one-third of total ASEAN sales.

Inside Line says: Ford will likely target the country's main vehicle segment, compact MPVs, which is dominated by Japanese brands. These vehicles are growing in popularity also in other markets in the ASEAN region.