AKARTA--Royal Dutch Shell PLC (RDSA) Tuesday began the construction of a $200 million lubricant plant in Indonesia to meet demand from rising car sales in the country.

Lubricants are used in motor oils and also the machinery and construction sectors.

The plant, which is in north Jakarta, has an annual capacity of 120,000 tons of lubricants, Shell Executive Vice President Mark Gainsborough said in a speech to mark the groundbreaking ceremony.

Passanger-car sales surged to an all-time high of 1.2 million units in 2012 due to rising incomes fueled by strong economic growth in recent years.

The Jakarta plant -- Shell's first in Indonesia but its sixth in Southeast Asia -- would allow the energy giant to tap into strong demand for vehicles in Southeast Asia's largest economy.

"We have ambitious plans to grow our lubricants business here in Indonesia and today's event markets another milestone in this journey," Mr. Gainsborough said.

It wasn't clear when commercial production would start.

Indonesia is the second-largest car market in Southeast Asia after Thailand.

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