Hyundai to invest $1.55bn in first Indonesian car plant

The Hyundai Ioniq is shown at AutoMobility event in Los Angeles on November 21, 2019. (AFP)
Updated 27 November 2019

Hyundai to invest $1.55bn in first Indonesian car plant

  • The facility, to be built in the city of Bekasi, east of Jakarta, will start production in late 2021

SEOUL: South Korea's Hyundai Motor said on Tuesday it has signed a preliminary deal to build a new factory in Indonesia, which would be its first car plant in Southeast Asia and a crack at Japanese rivals that dominate the market.
The deal comes as Hyundai and affiliate Kia Motors struggle with a prolonged sales downturn in China, where they suspended two factories this year.
Hyundai Motor said it will invest about $1.55 billion in the Indonesia auto manufacturing plant from now until 2030, including product development and operation costs.
The facility, to be built in the city of Bekasi, east of Jakarta, will start production in late 2021, with an annual capacity of 150,000 vehicles and a plan to grow that to 250,000 vehicles a year, Hyundai said.
Hyundai plans to make small sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs), while electric vehicles (EVs) tailored to Southeast Asian market are under consideration.
Hyundai said it is building the production facilities to avoid import tariffs ranging from 5% to 80% in the ASEAN region. The plant will cater to Indonesia, the region's largest automobile market, and other countries belonging to the Association of Southeast Asian Nations (ASEAN), it said.
The plant will allow the automaker to secure future growth to help it "combat slowing demand in the global automotive market", Hyundai said in its statement.
The deal was signed at an event attended by Indonesian President Joko Widodo and Hyundai Motor Executive Vice Chairman Euisun Chung. Widodo is in South Korea for a meeting of ASEAN leaders hosted by South Korean President Moon Jae-in.
Moon has been pushing a "New Southern Policy" aiming to deepen ties with Southeast Asia as Seoul seeks to curb its reliance on traditional trading partners like China and the United States.
Hyundai is far behind Japanese rivals in Southeast Asia, with its sales reaching 122,883 vehicles versus Toyota's 854,032 from January to September this year, according to research firm LMC Automotive.
LMC Automotive forecast a 4% year-on-year decline in total vehicle sales in the ASEAN region in the fourth quarter, partly because the slowdowns in the Thai and Indonesian economies show no signs of abating.
Hyundai said key ASEAN countries including Indonesia, Thailand, Malaysia, Vietnam and Singapore are expected to see combined vehicle sales grow to 4.49 million units in 2026, from 3.16 million in 2017.


Mexico objects to labor enforcement provision in North American trade deal

Updated 15 December 2019

Mexico objects to labor enforcement provision in North American trade deal

  • Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage
  • US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico

MEXICO CITY: Mexico’s deputy foreign minister, Jesus Seade, said on Saturday he sent a letter to the top US trade official expressing surprise and concern over a labor enforcement provision proposed by a US congressional committee in the new North American trade deal.
Top officials from Canada, Mexico and the United States on Tuesday signed a fresh overhaul of a quarter-century-old deal, aiming to improve enforcement of worker rights and hold down prices for biologic drugs by eliminating a patent provision.
How labor disputes are handled in the new United States-Mexico-Canada Agreement (USMCA) trade deal was one of the last sticking points in the negotiations between the three countries to overhaul the agreement.
Intense negotiations over the past week among US Democrats, the administration of Republican US President Donald Trump, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage.
However, an annex for the implementation of the treaty that was presented on Friday in the US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico.
“This provision, the result of political decisions by Congress and the Administration in the United States, was not, for obvious reasons, consulted with Mexico,” Seade wrote in the letter. “And, of course, we disagree.”
USMCA was signed more than a year ago to replace the North American Free Trade Agreement (NAFTA), but Democrats controlling the US House of Representatives insisted on major changes to labor and environmental enforcement before voting.
The letter, released on Saturday, is dated Friday and addressed to US Trade Representative Robert Lighthizer. Seade said he would travel to Washington on Sunday to raise the issues directly with Lighthizer and lawmakers.
“Unlike the rest of the provisions that are clearly within the internal scope of the United States, the provision referred to does have effects with respect to our country and therefore, should have been consulted,” Seade wrote.
Both Canada and the US House Ways and Means Committee said the deal included a mechanism for verification of compliance with union rights at the factory level in Mexico by independent labor experts.
Some Mexican business groups bemoaned a lack of clarity and conflicting information on how the rules would actually be enforced under the deal, the first text of which became public only on Wednesday.