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GM to End Vehicle Production in Indonesia

February 27, 2015
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General Motors Co. is not only trimming production in two plants in North America, as recently reported, but also shutting down a factory and axing many jobs in Asia. Reuters reported on Thursday that GM will no longer build cars in Indonesia.

The Detroit automaker will shut down its Bekasi plant in the Southeast Asian country and will be letting go of 500 workers by the end of June. The Bekasi facility was opened in 1995, but was closed a decade later. The company reopened the plant with a $150 million investment in 2013 to build the Chevrolet Spin.

The move comes after GM’s revival bid with the Spin proved unsuccessful. The local production of the Spin came with a high cost, mainly because GM had to import most of its parts. It was also not profitable because local sales were lackluster. Though the Spin was a strong seller in Brazil, it was not in demand in Indonesia: only 8,412 units were sold in 2014.

The problem is not the Spin itself, which GM considers a great product. The problem lies in the

Detroit-based auto giant’s decision to challenge the dominance of Japanese automakers in Asia. GM Executive Vice President Stefan Jacoby conceded that the company made a mistake by competing with Japanese rivals in a market considered as their “backyard.” The market share of Toyota Motor Corp. and other Japanese carmakers in the country is more than 90 percent.

GM has had a presence in Indonesia for eight decades, but it has yet to capture more market share. Local sales totaled 10,758 vehicles last year (fewer by 4,213 units compared to 2013), giving the company market share of less than 1 percent. Meanwhile, Toyota and its Daihatsu subsidiary delivered over 578,000 vehicles. The Spin was intended to be a rival of the Toyota Avanza, but it did not take off as the automaker expected it to.

While GM will no longer manufacture cars in Indonesia, it will continue to sell Chevrolet models in the country. Aside from the Spin (and the Spin Activ variant), GM will continue offering the Aveo small car, Orlando MPV, Captiva crossover, Colorado pickup truck and the Trailblazer SUV.

GM will also enter the Indonesian market with a joint venture with Chinese company SAIC Motor Corp. The partners plan to build a production plant near Jakarta for their Wuling brand, but do not intend to use the existing Bekasi facility.

Photo credit: © General Motors CC BY-NC

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