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.


$8bn blow to Erdogan as investors flee Turkey

Updated 37 min 57 sec ago

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.