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Toyota Motor, Japan’s biggest automaker, said that it would spend 41.3 billion yen ($534 million) to build a second plant in Indonesia to meet growing demand in Southeast Asia’s largest economy.

Toyota Motor Manufacturing Indonesia, its local vehicle production subsidiary, is constructing the Karawang No. 2 plant.

It is expected to be finished in early 2013 with initial production of 70,000 vehicles a year, Toyota said in press release on Wednesday.

Annual production capacity at the plant, located in West Java, about 40 kilometers from Jakarta, will eventually increase to 120,000 vehicles, it said.

Total production capacity in Indonesia will rise to 230,000 vehicles a year starting in 2014, including output from its Karawang No. 1 plant, Toyota said. It added that it would consider boosting exports from the country.

Toyota has several subsidiaries in Indonesia. It controls a 49 percent stake in Toyota Astra Motor, a Toyota assembly plant, with Astra International, Indonesia’s biggest automotive distributor, controlling 51 percent.

Toyota controls a majority stake in Toyota Motor Manufacturing Indonesia, a manufacturing plant, located in Karawang.

Domestic car sales hit a record 894,180 units in 2011, up 17 percent from the previous year, supported by low borrowing costs and a growing middle class.

Car sales in Indonesia surpassed those of Thailand in 2011, a fact that helps explain the increase in direct investment in the sector, Reuters reported, citing Leonardo Henry Gavaza, an analyst at Bahana Securities in Jakarta.

Gavaza said that sales this year would likely be flat or lower than in 2011 because of the higher base.

Trade Minister Gita Wirjawan, who is also head of the Investment Coordinating Board (BKPM), said on Tuesday that annual car sales in Indonesia could reach one million units in the coming years.