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JAKARTA | Fri Feb 25, 2011 4:02am EST

JAKARTA Feb 25 (Reuters) - Japan's Yamaha Motor Co plans to build a new motorcycle factory near Jakarta for investment of 10 billion yen ($122.07 million) to meet growing demand, an Indonesian newspaper reported on Friday.

Yamaha, the second biggest motorcycle seller in Indonesia, sold 276,586 units in January, when total industry sales rose 32 percent from the previous year, according to industry data.

The new factory will produce 300,000 motorcycles a year with the aim of making the firm compete with Indonesia's biggest motorcycle distributor Honda Astra Motor, a subsidiary of Honda , Bisnis Indonesia quoted Dyonisius Betty, the head of Yamaha's local unit, as saying.

The firm is able to produce 3.6 million motorcycles a year from three existing factories, Betty said.

Foreign direct investment is growing into Indonesia as firms eye an expanding consumer market, relatively cheap labour and political stability in Southeast Asia's biggest economy. Sales of cars and motorbikes have boomed.

The local unit of Japan's Daihatsu will invest 2.1 trillion rupiah ($237 million) to build a new factory producing low cost cars in Indonesia, the firm said this week. ($1 = 81.920 Yen) ($1 = 8870 Rupiah) (Reporting by Telly Nathalia; Editing by Neil Chatterjee)

Read the original article:http://www.reuters.com/article/2011/02/25/indonesia-yamaha-idUSL3E7DP0HO20110225