Toyota Plans Low-Cost Car for Traffic-Choked Indonesia

Jakarta Globe, Francezka Nangoy, Ardhian Novianto & Reuters | February 17, 2011

Toyota, through subsidiary Daihatsu, plans to invest 20 billion yen ($238.9 million) to build a factory in Indonesia to produce low-cost cars, Reuters reported on Wednesday. But far from offering freedom, there are fears that a surge of small autos may shut down the capital’s roads.

About 750,000 vehicles are expected to be added this year
to Jakarta's already-choked streets. (Antara Photo)

More car sales will only add to the daily traffic jams in Jakarta, an analyst said. The city administration has predicted total gridlock by 2012, based on estimates of population growth and 15 percent annual rises in car sales.

Daihatsu, which offers vehicles aimed at lower-income consumers, is eyeing production capacity of 100,000 cars per year. The factory is scheduled to begin operations in 2013, producing 50,000 cars in its first year.

The model will reportedly be smaller than Eitos, a low-cost car Toyota launched in India last year, with a sticker price between 800,000 and 900,000 yen.

Toyota Astra Motor and Astra Daihatsu Motor said they had yet to receive details from Japan.

“Daihatsu Indonesia has not received any formal plan from the parent company. Any further details about the new factory have yet to be specified,” said Amelia Tjandra, marketing director of Astra Daihatsu Motor.

Johnny Darmawan, president director of Toyota Astra, also said he hadn’t received notice. “I guess Daihatsu will be the producer for the new car. Daihatsu is the producer for cheaper car types. It could be another collaborated product, such as Avanza and Xenia — similar in design, but aimed for different market segments,” he said.

Jakarta Police data showed total vehicles in Jakarta reached 11.36 million in 2010, 8.24 million of which were motorcycles and 3.11 million were cars and trucks.

Amelia told the Jakarta Globe recently that even in a worst-case scenario — which would include private vehicles being prohibited from buying subsidized fuel and Bank Indonesia raising its benchmark interest rate amid inflationary pressures — car sales would match last year’s pace, a record 764,710 units.

That would put about 12 million vehicles on Jakarta’s chronically jammed roads.

Gunawan, a director at auto loan company Indomobil Finance, said most new cars sold in Indonesia cost around Rp 130 million to Rp 200 million ($14,600 to $22,400). “In the future, I believe car sales will keep growing because the demand for transportation will always there,” he said.

However, Gunawan claimed increasing car sales were not the cause of Jakarta’s traffic woes. He said a lack of viable mass transportation was forcing people to buy their own vehicles to get around.

Darmaningtyas, a director at the Transportation Study Institute, a non-governmental organization, warned that cheap cars would only make traffic worse.

“Small cars are not a solution to traffic congestion. Instead of motorcycles, small cars will be the common people’s choice. Therefore, there will be more cars on the streets and more congestion,” he said.

China is also aiming for a slice of the Indonesian market. Chinese carmaker Geely launched the budget price Panda in January. At Rp 98 million, it is the cheapest 1,300cc-class vehicle in Indonesia, Geely said.