Indonesian car producer Astra International has reaffirmed its interest to team up with French car maker PSA Peugeot Citroen, to assemble Peugeot cars in Indonesia to gain more benefits from the country's growing car market.

Constantinus Herlijoso, the CEO of Astra International-Peugeot, the authorized distributor of Peugeot cars, said on 12th August that the firm would assemble complete knock down (CKD) cars at the production facility of Astra's subsidiary, Gaya Motor, in Sunter, North Jakarta.

"We expect that the assembly process can start in 2012 and we can start selling locally-assembled cars in 2013," he told reporters in an email interview. However, he declined to comment on the value of the planned investment and the number of possible assembled cars.

Constantinus said that automobile components would be sourced from France and also from Indonesia, with a proportion of local content being under review.

So far, he explained, the firm plans to sell the cars in the domestic market, which has consistently performed at double-digit growth annually over the last ten years, and has huge potential to keep expanding in the future. "Peugeot's market share in the domestic market is still very small, less than 1 percent. By assembling the cars in Indonesia, we expect to grab more shares," he said.

Currently, Astra International-Peugeot imports completely built up (CBU) cars, primarily from France, with a smaller quantity coming from Malaysia. In Asia, Peugeot operates a plant in China, besides Malaysia, which serves as a regional assembly base.

During the first half of this year, the firm sold 94 cars, of four models - 207 hatchbacks, 308, 3008, and 5008 - from an overall 240 cars targeted until the year's end.

Previously, the firm said that by assembling in Indonesia, it could reduce its production costs and boost its sales, as prices would be more competitive, given lower tax rates and local components. Right now, the import duty of CBU cars is 40 percent as opposed to 15 percent for CKD cars.

Peugeot domestically assembled its 206 model from 2003. However, in 2005, it ceased operations due to the skyrocketing value of the euro, which pushed up prices and triggered a drop in its annual sales from 2,000 units to 85 units in 2009, which last year increased to 203 units due to an overall growth of Indonesia's car market, which topped 744,895 units.

The Indonesian Automotive Industry Association (Gaikindo) has projected those automobile sales for 2011 will top 800,000 units, which would be a historic new figure in Southeast Asia's largest economy.

Stellar economic performance, an improved investment climate and a rising middle class in Indonesia has boosted the confidence of automakers to increase investment in the country.

Major automakers, such as Toyota Motor Manufacturing Indonesia, Nissan, and BMW, have recently unveiled plans to continue investing in Indonesia, while Japanese car maker, Astra Daihatsu Motor, is due to construct a new factory in East Karawang, West Java, estimated to cost IDR 2.1 trillion (US$ 246 million).

Recently, China's biggest private automaker, Geely Automobile Holdings, which is a newcomer to the Indonesian market, revealed its plan to build an assembly plant in Cikarang, Bekasi, West Java, with a total estimated investment of up to $50 million. Operations are expected to commence in 2015.