JAKARTA - Indonesia's improving investment climate and high automobile sales led two major Japanese car makers, Daihatsu and Suzuki, to name the country their production base for global and regional markets, local media reported here on Wednesday.

Industry Minister MS Hidayat announced on Tuesday that Daihatsu would hold a ground-breaking ceremony on May 20 to mark the beginning of the construction of its new production facility in Karawang, West Java.

"The investment value for the factory is 2.1 trillion rupiah ( about $245 million)," he said at his office here.

Astra Daihatsu Motor's president director Sudirman Maman Rusdi confirmed the minister's announcement on Tuesday, saying that the 2.1 trillion rupiah investment was just the money his company set aside for building and equipment.  

Sudirman revealed the expansion plan on February 23.

"The investment doesn't include the funds we spent buying the land for the new production facility. The facility is projected to begin operating in November next year," he was quoted by the Jakarta Post as saying.

According to Sudirman, the factory would have a production capacity of 100,000 cars per year. Currently, Daihatsu already has a production facility in Sunter, North Jakarta, with a total capacity of 330,000 cars per year, so the new factory will boost its production to 430,000 cars per year starting from 2013.

"Fifteen percent of the cars produced in Indonesia will be exported. We export our cars to many countries such as Brunei, Japan, Mexico, the Philippines, South Africa and Thailand," Sudirman said.

Seeing the enthusiasm in the domestic market in purchasing cars, Daihatsu aims to sell 120,000 cars this year in Indonesia, with the Xenia, Grandmax and Terios models expected to become the largest contributor to sales, he said.

In addition to Daihatsu, Hidayat said Suzuki will also make Indonesia its production base. The company had set aside 800 million U.S. dollars to expand its current production capacity in Indonesia, he added.

Suzuki currently has a production facility in Tambun, West Java, with a total production capacity of 110,000 cars per year.

Indonesia's car sales rebounded by 57 percent to 764,710 units in 2010 as the local market successfully recovered from the market slump in 2009 during which sales fell 20 percent to 486,061 units from 607,805 units in 2008.

The Indonesian Automotive Industry Association (Gaikindo) predicted earlier that 2011 car sales might peak at between 780, 000 and 830,000 cars.

Sudirman acknowledged that the earthquake and tsunami that recently hit Japan had caused several disturbances in the supply of materials for automobile manufacturing in the country. The situation is expected to return to normal in a month or two.

In the first quarter this year, car sales rose 30 percent to 225,061 units from 174,074 units in the same period last year, Gaikindo data says.