Geely Holding Group, China's biggest privately owned carmaker, will start assembling cars in Indonesia after an initial plan to produce them in Malaysia was rejected by the government in Kuala Lumpur.

Geely will assemble its 1.1-litre, 1.3-litre and 1.5-litre cars in a plant near Jakarta and begin selling them in November, said Cam Soh Thiam Hong, group executive chairman of Alado, the Malaysian sole distributor of Geely cars in Southeast Asia.

Malaysia allows foreign carmakers to assemble and sell vehicles in the country if they are not directly competing with those made by state-held Proton Holdings.

The policy benefits Indonesia, which offers incentives for foreign investments and accelerates approvals to boost its economy, analysts say.

For Indonesia, "any foreign investment is good as it means more jobs and more money for the government," said Erwan Teguh, head of research at Danareksa Sekuritas.

Alado took only two weeks to obtain approval to sell Geely cars in Indonesia, Mr Soh said. The company and its Indonesian partner, Indomobil Sukses Internasional, began selling Chery's 0.8-litre engine cars in the country last week, with the aim to sell 1,000 cars this year.

Geely, which will be the second Chinese carmaker to assemble cars in Indonesia, plans to boost exports to 65 per cent of total sales by 2015.

Chery Automobile started last week to sell the cheapest cars in Indonesia. "The Indonesian market is huge," Mr Soh said yesterday in Petaling Jaya, outside Kuala Lumpur.

Alado "is in the final stage of concluding an agreement with an Indonesian partner", he said, declining to elaborate.

The Malaysian government considers Geely a "direct competition to the national car [Proton]," and would allow them to be assembled in the country only for exports, Mr Soh said.

In Malaysia, the 0.8-litre Chery QQ AMT is being sold at slightly more than M$41,000 (HK$86,661). The cheapest Proton model is the 1.3-litre Iswara, which sells at about M$34,500.

(For more biz stories, please visit Industry Updates)