Geely sees Indonesia as Southeast Asia auto hub

China's Geely Automobile Holdings Ltd plans to set up a car factory in Indonesia by 2015 to tap rising demand in Southeast Asia's biggest economy and make it a production hub for the region, the CEO of its Indonesia unit said on Thursday.

Indonesia's strong economic growth helped boost auto sales by 57 per cent last year, encouraging many big automakers including Toyota Motor Corp and Suzuki Motors to increase investment and build new factories in the country.

"The market is still huge for us given the expectation of better infrastructure development," said Budi Pramono, chief executive of Geely Mobil Indonesia.

"Geely's strategic move is to make Indonesia as its production hub in the region to tap that market."

Indonesia's government has forecast car demand will reach more than 2 million a year by 2020, helped by a rise in incomes on the back of a commodities boom.

Geely, which currently assembles around 2,000 cars annually in Indonesia using an Astra International factory, will set up a new plant near Jakarta with initial capacity of 10,000 vehicles per year and start-up investment of $20 million.

The factory will increase output to 50,000 units a year within two or three years with up to $50m in investment, concentrating on smaller, cheaper and more fuel efficient "city cars".

Geely currently offers four type of city cars, including Panda and LC-Cross, aimed at competing with Toyota's Yaris and Honda Motor's Jazz.

Japanese car makers dominate the auto market in the world's fourth most populous nation.

Geely needed to overcome a reputation Chinese products had among many Indonesian consumers for poor performance and after-sales service, Pramono said.

"We need to fix the image that every Chinese auto brand is a bad product."

Much of that reputation stems from a flood of cheap Made-in-China motorbikes which arrived in the early 2000s.

Having a factory in country and a large after-sales network would help address such concerns, he added.

"Most of the Korean and Chinese firms only appointed distributors here and don't want to invest in a factory or after-sales offices," he said.