Credit: Coming on the heels of robust Indonesian ( IDX , quote ) sales numbers recently released by competitors, Astra Daihatsu Motor, Southeast Asia's largest auto manufacturer and the Indonesian distributor of Daihatsu vehicles, has announced it is investing $68.7 million to build a research and development center in the archipelago.
[caption align="alignright" caption="The Land of the Rising Sun dominates the Indonesian car market."] 
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"The first phase of construction has begun, with an investment of Rp 150 billion ($15.8 million)," Astra Daihatsu Motor president director Sudirman Maman Rusdi told the Jakarta Globe last week. "The construction will take about three years."
Sudirman, who made the comments in Jakarta after meeting with Industry Minister M.S. Hidayat, said the second and third phases are estimated to cost an additional $52.9 million .
Daihatsu is the second best-selling brand in Indonesia with a 25.6% market share; parent company Toyota ( TM , quote ) has nearly 40% market share. Daihatsu however, faces stiff competition from Japanese rivals such as Honda ( HMC , quote ), whose June 2012 sales more than tripled year-over-year, Suzuki, whose annual sales jumped 61%, and Nissan, which achieved record sales during the first half of 2012.
In response, Daihatsu has announced that it would invest $233.3 million in a new factory in Indonesia to boost annual production to 430,000 units from 330,000 units. The research and development center will be adjacent to their plant in Karawang, West Java.
The Indonesian government is encouraging other auto manufacturers to follow Daihatsu's lead in investing in research and development centers in Indonesia that will enable them to better market their products to local consumers. With a growing middle class and relatively easy access to car loans, Indonesia is on the verge of surpassing Thailand as Southeast Asia's largest car market.
"The government expects each carmaker to have technological independence and prepare everything from assembling to research and development centers," said Budi Darmadi, the industry ministry's director general for high-technology-based priority industries. Daihatsu's move, he said, shows it "intends to stay for the long term."
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
