Photo: Hyundai Motor

JAKARTA (TheInsiderStories) – South Korean’s Hyundai Motor will establish a joint venture (JV) in Indonesiaas a stepping stone in entering the commercial vehicle market in Indonesia and branch into the Southeast Asian market. The Korean automobile giant signed a joint venture agreement with Artha Graha Network (AG Network) on Tuesday (12/12) at the South Korea Embassy.

The JV between Hyundai and AG Network, parent company of the reseller of Hyundai’s commercial vehicles, will be set up in Jakarta in May, 2018. The new JV will manufacture commercial vehicles, such as medium and large-sized trucks, in the facilities owned by the AG Group.

Witnesses of the signing, Head of Creative Economy Agency Triawan Munaf, Indonesian Ambassador Umar Hadi, Hyundai Motors Commercial Business Responsible Han Seong-kwon, Hyundai Motors Export Division Head Lee Inchul, representatives and from AG Group Iki Wibowo.

Hyundai Motor hopes to build a solid sales and service network and assembly and production base in Indonesia. In the analysis of Hyundai, the number of projects in Indonesia, especially in the mining sector makes the demand for commercial vehicles is increasing.

It is estimated that the needs of the commercial vehicle industry in Indonesia, which reached 70,000 units last year will grow to 76,000 units this year and exceed 100,000 units by 2020. In addition, the newly formed JV is intended as a strategic export base for other countries around Indonesia and will begin full new market exploration.

The company and assembly plant of Hyundai Trucks and Buses in the early stages will be able to deliver XCIENT Trucks and ALL New MIGHTY of 2,000 units per year. It is planned that the location of Hyundai Commercial Car Plant in Indonesia will be located in Industrial Artha Induatrial Hill in Karawang, West Java.

Indonesia is a key market for Hyundai’s expansion into the Southeast Asian market. According to the Korea Trade-Investment Promotion Agency (KOTRA), Indonesia has the largest automobile market size in the region with 1.11 million units of cars sold every year.

Korean carmakers are still less known in the Southeast Asian market. Hyundai has chosen to export its vehicles in the form of CKD as it could be risky to set up a complete vehicle plant in the first place that requires many components makers. By doing so, the automaker can also save cost as Indonesia has zero tariffs for imported car components.

But it will not be easy for Hyundai Motor to immediately record large revenues in the region. Japanese carmakers currently take up over 90 percent of Southeast Asia’s commercial vehicle market as they set up car assembly lines in the region from the 1960s.

According to the Association of Indonesian Automotive Industries, three Japanese carmakers, including Mitsubishi Fuso, accounted for a share of 95.9 percent in the Indonesian commercial vehicle market last year.

Established in 1967, Hyundai Motor has grown into the Hyundai Motor Group, which was ranked as the world’s fifth-largest automaker since 2007 and includes over two dozen auto-related subsidiaries and affiliates.

Currently Hyundai Motor has six overseas plants in the U.S., India, China, Turkey, the Czech Republic and Russia. The company will add a seventh plant by 2012, in Brazil. Hyundai Motor today has a combined global production capacity of about 3.91 million units a year (Korea Domestic: 1.86 million and Overseas: 2.05 million).

While AG Network owned Tomy Winata, an Indonesian businessman with interests in banking, property, gambling and infrastructure, whose wealth comes from his business deals for the Indonesian Military.

He is the son of an automobile spare parts trader and left school in the seventh grade upon which he sold ice pops to support his family. Winata’s business empire has been developed under the Artha Graha Group and Artha Graha Network.

Winata also involved in the property sector through PT Jakarta International Hotels and Development,Tbk (IDX: JIHD), which owns Borobudur Hotel in Central Jakarta and PT Danayasa Arthatama,Tbk (IDX: SCBD), which owns the Sudirman Central Business District (SCBD) in the heart of Jakarta.

Winata also has business ventures outside of Indonesia, including in Timor Leste. Besides his legal operations, Tomy is also a member of the so-called “nine dragons”, a group comprising the major individuals behind Jakarta’s gambling industry, despite the practice being banned in Indonesia.

Written by Linda Silaen, Email: