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GM and SAIC would invest a total of $700 million in Indonesia to set up operations to manufacture and market Wuling vehicles in the country


BEIJING (Reuters) - General Motors (GM.N) and Chinese partner SAIC Motor Corp will soon announce a joint push into Indonesia, using their no-frills Wuling brand to establish a beachhead in Southeast Asia's biggest market and from there tackle other markets in the region.

They have already made moves to purchase a property in an industrial district on the outskirts of Jakarta, according to two people familiar with the matter, and are expected to detail within days what GM China chief Matt Tsien called an important joint venture in a country of 240 million people.

In a report late Friday, officials from Indonesia's industry ministry told state Antara news agency that GM and SAIC would invest a total of $700 million in Indonesia to set up operations to manufacture and market Wuling vehicles in the country.

GM and SAIC, according to the report, plan to start construction of the Wuling assembly plant in August 2015 with an aim to commence production in 2017. The factory will have capacity to produce 150,000 vehicles a year. The report followed a visit to the ministry on Friday by a delegation of GM and SAIC officials, according to Antara.

A GM spokeswoman in Shanghai said she could not confirm details in the report.

For GM, Indonesia will be its second non-China market in Asia, having already broken into India with SAIC, where they cooperate to market Wuling's small multi-purpose workhorse vans.

The move points to a thaw in what industry watchers considered a creeping chill in the two companies' partnership over recent years.

GM said SAIC-GM-Wuling, which also includes Wuling Automobile Co as a stakeholder, will own 80 percent of the new Indonesian venture. SAIC will separately own the rest.

GM owns 44 percent of SAIC-GM-Wuling, SAIC owns 51.1 percent, and Wuling owns 5.9 percent, so GM's stake in the Indonesian venture will effectively be 35 percent.

The venture will manufacture and market low-cost "people mover" microvans, based on the same vehicles that in China, under the Wuling brand, can sell for just under 30,000 yuan (3,187 pounds).

GM already operates a sales and manufacturing company in Indonesia with a range of Chevrolet vehicles that includes a strategic compact people mover of its own, the Chevy Spin.

Tsien said GM and SAIC saw the two brands as complementary, rather than rivals, as they will be differentiated by pricing, product quality and features.

Wuling's focus is "great functionality, attractive styling and value for money", Tsien said. "That's the basic element that really works here in China, and we believe under SGMW's leadership this will be quite successful in Indonesia as well."

The GM China chief said Indonesia had a large and growing appetite for simple multi-purpose vans, often with three rows of seating that can accommodate seven or eight people.

He declined to say exactly what type of microvans they are planning for Indonesia or how they would market or price them.


Stiff competition will come from Toyota and other Japanese brands, which control over 90 percent of the auto market in Indonesia.

"There is plenty of room to play," Tsien said.

The GM-SAIC move largely mirrors a strategy being pursued by Japan's Nissan Motor Co , which has revived Datsun, a brand name it retired in the 1980s, to market cars affordable to middle-class consumers in countries such as Indonesia, India, Russia and South Africa. Nissan began selling a Datsun in Indonesia last May starting at 87.9 million rupiah (4,626 pounds).

Daihatsu , a small car specialist affiliated with Toyota, is scrambling to come up with $5,000 cars and is trying to compete in Indonesia with Datsun and Suzuki, which also focuses on no-frills mass-market cars.

The new GM-SAIC venture suggests their global emerging-market strategy might be picking up a head of steam.

GM's top executives including former chief executive Dan Akerson have previously said GM and SAIC were likely to cooperate beyond India, where they have been selling Wuling-designed microvans.

Tsien said the new joint venture aims eventually to export its affordable cars out of Indonesia to neighbouring markets in Southeast Asia.

The GM-SAIC partnership went global in 2010 when China's biggest carmaker became a 50-percent partner, but SAIC nearly reversed that investment in 2012 by cutting its stake to 9 percent after the joint venture struggled.

That was widely seen as a cooling of the relationship, a view compounded later that year when SAIC formed a joint venture with a local firm in Thailand to market cars there without GM involvement.

GM officials at the time downplayed concerns over the health of their partnership and noted the two were still looking to cooperate closely in India and Southeast Asia.

"Our relationship is stronger than ever," Tsien told Reuters.

"It's a very ... mutually respectful relationship. We understand each other's interests. We look for opportunities to win together."

(Reporting By Norihiko Shirouzu in Beijing; Editing by Will Waterman)

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