Volkswagen plans investment in Indonesia image

In order to strengthen its position in Southeast Asia’s second biggest automotive market, German automaker VW reportedly plans an important investment.

According to Industry Minister MS Hidayat the investment concerns the build of a new assembly plant in the region, which would be used by the company to maybe produce eco-friendly cars, starting next year.

“It (VW) has carried out in-depth research to understand our market, its competitors, efficient selling price and other things. With its proposed plan, it means it’s ready for competition,” he said.

As the VW top executives will only visit Jakarta later this week to announce the investment plan, Hidayat declined to elaborate on the exact figure of the investment and details of the plant. Still, he disclosed that the German-based automaker might take part in the government-backed green car program with the possible production of hybrid cars.

This is because new government regulation rolled out in May allows for tax reduction for the domestic production of eco-cars, dubbed “low carbon emission cars” – besides hybrids and electric cars, also advanced diesel/gasoline, biofuel and gas engines are included in the category.

With the system in place, automakers producing vehicles that can run 20 to 28 kilometers on one liter of fuel can get a 25% reduction of sales tax, while other types of cars that can go more than 28 kilometers per liter of fuel might enjoy 50% tax cut.