General Motors Co confirmed on Monday its plans to build a new manufacturing facility in Indonesia, a move that will put pressure on Japanese peers, which dominate the region.
SAIC-GM-Wuling, a joint venture between GM China, Wuling Motor and state-owned SAIC, will establish a plant close to Jakarta in order to start manufacturing Wuling brand vehicles. The minivans are intended to be initially sold in Indonesia, but they could be delivered to other Southeast Asian markets in the future.
Indonesia is the third biggest country in Asia with population of 240 million and total vehicle sales of 1.21 million in 2014, according to the Indonesian Automotive Industry Association. Additionally, the country is poised to become the largest car market in Southeast Asia.
The joint venture, which is 50% owned by SAIC, 44% by GM China and the rest by Wuling, was founded in 2002 and headquartered in Liuzhou, Guangxi, China. Wuling is also the biggest joint venture of GM.
Wuling, which primarily focuses on its popular minivans, but it also produces Baojun sedans, was the first Chinese manufacturer to sell 1 million units in 2009. In 2014 the brand accounted for nearly half of GMs sales in China with 1.6 million vehicles sold.
While construction is projected to start this year, vehicle production is expected to begin in 2017, according to the Indonesian news agency Anatara. The newly build plant would be able to manufacture around 150 000 vehicles within the first year of opening and construction costs are valued at $700 million. The details were not confirmed by the companies.
The creation of the plant also marks another partnership between GM and SAIC outside of China. In 2010 the companies split 50/50 a venture in India. Although the companies had plans to expand to Southeast Asia, operations did not have much success and SAIC reduced its stake to 9% in 2012.
The move also follows a trend created by Chinese carmakers to look for expansion opportunities outside their domestic market. While the majority of manufacturers, including Geely and Great Wall, focus their efforts on developing markets, like Russia, Iran, Bulgaria and Chile, some prefer other regions.
Last year Dongfeng Motor, another state-owned company, acquired a 14% share in Frances Peugeot for €800 million. After the deal was done, the companies said they would focus on South Asia.
GM lost 1.63% on Friday and closed at $32.62 in New York, marking a one-year decrease of 11.45%. The company is valued at $52.41 billion. The stock was down 0.03% to $32.61 at 10:57 GMT during after-hours trading.
According to the Financial Times, 16 analysts offering 12-month price targets for GM have a median target of $39.50, with a high estimate of $51.00 and a low estimate of $28.00. The median estimate represents a 21.09% increase from the last close price.
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