GM yields Indonesia to Japanese automakers

Or does it?

General Motors, which was the first automaker to set up an assembly plant in Indonesia, will stop making cars bearing the GM marque in the country after closing its factory in Bekasi and dismissing some 500 workers.

The Bekasi plant when launched in 1995.

The assembly plant first commenced production in 1995 but was shuttered for the first time a decade later as Japanese brands overtook majority of the market share; it reopened two years ago when GM made another bid for the market with the Chevrolet Spin, a small “people mover” van, the type of vehicle popular in Indonesia. The Spin didn't meet the same success as it did in Brazil - to produce it in Indonesia required importing most of the parts; logistics were complicated and the low volume did not allow the automaker to localise the vehicle, making it less profitable.

The Spin sold for around US$12,000, putting it in competition with the best-selling Toyota Avanza, but failed to take off. The Bekasi plant thus became a burden rather than a cash cow; last year’s production was less than a quarter of the plant's full capacity of 40,000 vehicles a year – only 8,412 Spin’s were sold domestically and 3,000 were exported.

Last year, GM sold fewer than 11,000 vehicles in the country, which is a paltry market share of less than 1%; Japanese marques together, led by Toyota, conquer more than 90% of the market. GM Executive Vice President Stefan Jacoby acknowledges that the American automaker made the mistake of going head-to-head with their Japanese competitors in the latter's “backyard”.

But as GM retreats from Indonesia leaving behind only a sales operation, it enters in another form - in partnership with its Chinese partner, SAIC Motor Corp, to push their joint venture Wuling brand. Wuling produces low-cost microvans which retail for about US$8,000 in China. The automakers confirmed earlier this month that they will set up a manufacturing plant near Jakarta, producing vehicles primarily for the domestic market. The Antara news agency reported that the total investment for the plant will be about US$700 million, and it will have an annual manufacturing capacity of 150,000 vehicles when it commences in 2017. Neither of the automakers, however, has offered confirmation of the details.

Although the Spin has proven that success in one country doesn’t guarantee success in another, the SAIC-GM-Wuling minivans has been enjoying robust demand from the less wealthy people from the rural parts of China; sales increased last year by 8.4% to more than 1.6 million units, making up about half of all vehicles that GM managed to sell in China.

image: gmauthority.com