Astra International Indonesia plans to continue dominating Indonesia's booming car and motorcycle markets by spending billions of dollars on expansion and becoming the first auto maker to sell a car priced to reach the country's emerging middle class.

Chief Executive Prijono Sugiarto said his company will hold its ground, despite new competition from Ford Motor, Hyundai Motor, Tata Motors and others in Southeast Asia's largest market. Astra, Indonesia's largest auto company, is so far ahead of its rivals in capacity, sales and service networks that newcomers struggle to match its prices and reach.

Astra controls 54% of the passenger-car market through joint ventures with Japan's Toyota Motor, Daihatsu Motor and Isuzu Motor and holds 58% of the motorcycle-and-scooter market through a joint venture with Honda Motor.

To expand the pool of Indonesians who can afford a car, Astra plans next quarter to introduce models with sticker prices as low as US$ 8,000 through its joint ventures with Toyota and Daihatsu. Currently, the least-expensive passenger cars in Indonesia sell for at least US$ 12,000.

Passenger-car sales reached a record in Indonesia last year, breaking the one-million-vehicle mark. Mr. Sugiarto predicted that could rise to 1.25 million this year, while two-wheeler sales could climb as high as 7.5 million, from seven million last year.

While low prices for commodities such as coal and palm oil, an important part of the Indonesian economy, have left many consumers with less money and new auto-loan restrictions have hurt demand for new cars, the coming low-cost cars will lead to more vehicle sales this year, he said.

"We will be the first offering affordable vehicles," he said. "This year, [auto-sales growth] should at the very least be flat, provided this new car is launched."

Astra and its Japanese partners are proceeding with more than US$ 2 billion in new investment to boost capacity and expand their reach to Indonesia's far-flung islands. "We don't have any intentions of slowing down whatsoever," Mr. Sugiarto said.

Less than 5% of Indonesia's 240 million people own cars. As lower prices and strong economic growth put a car within reach of more Indonesians, annual sales could eventually hit three million vehicles. While China's market is five times that size, Indonesia's market is expected to expand faster.

The success of Astra's foray into lower-cost cars will help gauge how long it can defend its pole position in Indonesia and how far down the income ladder Indonesia's consumption explosion will expand.

Astra has ridden Indonesia's impressive economic expansion gross domestic product has increased more than 6% in four out of the last five years to become the country's largest company by market value. Above 60% of it's more than US$ 18 billion in sales last year came from autos, auto parts, motorcycle and vehicle financing. But the company also is a top player in the heavy-equipment, coal and palm-oil industries.

Mr. Sugiarto said the low-cost car could be introduced as early as April. Astra is waiting for the government to decide the tax rate on the car. Mr. Sugiarto said he expected the vehicle will get special tax treatment under the green-car program, because of its high fuel efficiency. The car, with the names Toyota Agya and Daihatsu Ayla, will go more than twice as far on a litre of gasoline as Indonesia's most popular current vehicles, Mr. Sugiarto said.

Other auto makers, including India's Tata and Japan's Nissan Motor are scheduled to roll out their own inexpensive, fuel-efficient models in Indonesia, but not until later, said the analyst at a consulting firm.

Even in this new market segment, auto makers will find it challenging to compete with Toyota and Daihatsu and their national network of more than 1,700 sales and service outlets. "They have done a very good job of building a moat around their business," Mr. Dunne said. "And they are extremely price competitive."

Booming demand for passenger cars and motorcycles was doused when Indonesia's central bank last year raised the minimum down payment required for car loans. Auto sales also might have been higher if not for low prices for commodities including coal, palm oil, tin and rubber that Indonesia exports.

Meanwhile, surging minimum wages are cutting into Astra's bottom line. In the capital Jakarta and across the archipelago, provinces have raised minimum wages as much as 45% this year.

Astra, which employs more than 180,000 people, can't shoulder that kind of new cost burden every year, Mr. Sugiarto said. "We are trying to accommodate them," Mr. Sugiarto said. "But they can't ask for 40% every year or we will all die together."