Hyundai Motor expands business in Indonesia with its EVs

Industry

Published: 05 May. 2022, 15:56

Hyundai Motor expands business in Indonesia with its EVs

Hyundai Motor launched the Ioniq 5 during the Indonesia International Motor Show in March. [HYUNDAI MOTOR]

Hyundai Motor is steadily expanding its presence in Indonesia, targeting the Southeast Asian market largely dominated by a few Japanese automakers.

Electric vehicles (EVs) may give the company the breakthrough it needs to squeeze into the saturated market.

The Korean carmaker said on May 1 it received 1,587 Ioniq 5 orders in Indonesia from April 22 to 27. That's more than double all of the all-electric vehicles sales in the country during the whole of 2021, in which only 693 units were sold, according to data by the Association of Indonesia Automotive Industries.

Hyundai Motor first introduced the Ioniq 5 in Indonesia in late March during the Indonesia International Motor Show. The sticker price starts at 718 million rupiah ($50,000) there.

Hyundai's achievement is very surprising as Southeast Asian markets are traditionally considered to be the stronghold of Japanese carmakers. The market share of Japanese car brands in six Asean countries including Indonesia, Thailand, Malaysia and Singapore was around 74.3 percent as of the end of 2019, according to the Korean Automotive Manufacturers Association.

In Indonesia alone, five Japanese carmakers — Toyota, Mitsubishi Motors, Suzuki Motor, Isuzu Motors and Honda — accounted for nearly 94 percent of the share last year.

But things are different in terms of the EV market. A total of 605 Ioniq 5s and Kona SUVs were sold in Indonesia last year, making up 87 percent of the country’s all-electric vehicle market.

Though EVs take up less than 0.1 percent of the country’s total car sales, Hyundai Motor hopes the growing awareness will contribute to boosting its combustion engine sales as well.

Hyundai Motor’s Creta models are parked in front of the Korean automaker’s plant in Bekasi, Indonesia, on Jan. 13. [YONHAP]

Hyundai sold 1,440 gasoline-powered Creta SUVs in Indonesia in March alone, beating Honda’s HR-V SUVs. HR-Vs have long been the No. 1 vehicle in Indonesia in terms of sales in the mid-size SUV category.

Hyundai in April completed a $1.55 billion manufacturing plant in Bekasi of West Java, Indonesia — the Korean automaker’s first in the Asean region. The factory, which was built on a 777,000-square-meter (8.4 million-square-foot) site, will have an annual production capacity of 150,000 units by the end of the year. Hyundai intends to expand the capacity to 250,000.

Hyundai's Ioniq 5s, Creta SUVs and Santa Fe SUVs will be produced at the new plant and shipped to Southeast Asian nations such as Vietnam, the Philippines and Thailand. Those exports will be exempt from tariffs due to the Asean Free Trade Area agreement.

"Indonesia is a country that Japanese automakers entered so long ago and have dominated for decades, so it was quite hard for us to enter the market," said a spokesperson for Hyundai Motor. "But we now have a manufacturing plant in Indonesia, and it will be a lot easier to make cars and sell them there right away."

In July 2021, Hyundai Motor and LG Energy Solution established a 50-50 joint venture to build a battery factory in Karawang Regency, Indonesia, 65 kilometers (40.4 miles) southeast of the capital of Jakarta. The factory will occupy a 330,000-square-meter plot and will have an annual production capacity of 10 gigawatt-hours, or enough for approximately 150,000 EVs.

Construction is expected to finish in the first half of 2023, and operations should start in 2024. Its batteries will be sourced to Hyundai’s Bekasi plant.

Indonesia is rich in natural resources essential to making EV batteries, which will help Hyundai cut the cost of components.

It has the world's largest nickel reserves, 21 million tons, around 22 percent of the total, according to U.S. Geological Survey data. The agency estimates Indonesia produced 760,000 tons of nickel in 2020.

“Though Hyundai has grown as one of the world’s four biggest automakers beating Stellantis and General Motors, its sales in Asean countries were not significant,” said Kim Yong-jin, business professor at Sogang University. “It would be able to secure a stronger position in the Southeast Asian market if it could catch up with the Japanese brands taking Indonesia as the bridgehead.”

BY SARAH CHEA, MOON HEE-CHUL [chea.sarah@joongang.co.kr]