Toyota Motor Corporation (TMC), the world's biggest automaker, kicked off operations at its new auto plant in Indonesia on Friday, a move that will pave the way for Southeast Asia's second biggest automarket to become a new regional production hub.

The development of the facility in Karawang, West Java, with an investment of 3.3 trillion rupiah ($340 million), reflected Toyota's confidence in Indonesia's growing importance, laying the foundation to make the country its key production base in the future, TMC senior managing officer Takahiro Iwase said during the inauguration ceremony of the plant.

Toyota now operates its largest facilities in Thailand, Southeast Asia's biggest four-wheeler market, with an annual production capacity of over 600,000 vehicles.

"We also plan to develop Indonesia as an auto export base. Our Karawang plants have become indispensable to the future growth of global Toyota," he said. The plant, which is Toyota's fourth after two in Sunter, North Jakarta, and another also in Karawang, will be able to produce 70,000 cars per year, boosting Toyota's overall capacity to 180,000 units.

In the initial phase, the plant will make Toyota's newly launched Etios Valco, which is specially modified to suit Indonesian roads and taste of local consumers, according to Masahiro Nonami, the president director of Toyota Motor Manufacturing Indonesia (TMMIN), Toyota's joint venture with local partner Astra International.

"The production of Etios Valco is the newest chapter of commitment to contribute to the development of Indonesia's automotive industry," he said.

The production of Etios Valco will follow the previous car, Toyota Innova, produced in its first Karawang plant.

Johnny Darmawan, president director of Toyota Astra Motor, which handles distribution and after-sale service of Toyota's cars, said that in the short term, it aimed to sell Etios in the local market, but would be open to opportunities in the regional market.

"If the model becomes a hit in the Indonesian market, there will be demand from other ASEAN countries, too. When there's such demand, we'll export the cars," he said.

At present, TMMIN exports a variety of vehicles in the form of completely built-up, completely knocked-down units, engines and various components to many countries in Asia, Middle East and South America. Innova and Fortuner models currently make up more than half of Indonesia's total automobile exports.

TMMIN president director Made Dana M. Tangkas said that as the domestic and overseas demand further surges, the firm would continue expansion to boost output to 250,000 units per year by 2014.

"We will start upgrading the capacity of the new Karawang plant at the end of this year, or early next year," he said.

As strong growth in the gross domestic product strengthens people's purchasing power, auto sales, an indicator of consumption in Southeast Asia's largest economy, reached 1.12 million units last year, up 24.83 percent from 2011, much higher growth compared to other Asian countries, including Thailand, China and India.

The government is gearing up to spur growth in the automotive industry, a backbone of the country's manufacturing industry, by preparing a range of tax incentives to attract new investment.

It is expected to soon launch a new rule on vehicles with low carbon emissions, which includes the so-called "low-cost green cars".

Industry Minister MS Hidayat said on Friday on the sidelines of Toyota's event that the government would pass the long-deliberated regulation within the next two weeks as it only required approval from President Susilo Bambang Yudhoyono.

"It will certainly cut down the luxury-goods sales tax for low-cost green cars up to zero per cent," Hidayat told reporters after the ceremony.