The automaker told Reuters on Wednesday it would invest an additional 15 billion yen ($195.11 million) in the facility due to the increase.
The Karawang plant produces the Kijang Innova compact MPV and the Fortuner SUV for the domestic market and export markets including Thailand and South Africa, according to Toyota.
Domestic car sales in Southeast Asia's largest economy stood at a record 894,180 cars in 2011, up 16.9% from the previous year, supported by the lowest ever interest rate and a growing middle class.
"With many manufacturers planning to substantially increase their capacity, it implies that the industry is bullish about Indonesia's automotive market," said Leonardo Henry Gavaza, an analyst at Bahana Securities in Jakarta.
Indonesia's domestic car sales surpassed those of Thailand in 2011, a fact that helps explain the increase in direct investment in the sector, Gavaza said, adding that car sales in 2012 will likely be flat or lower than in 2011 because of the higher base.
But sales should reach 1 million cars this year and 8.8 million motorcycles if the government drops its plan to raise fuel prices and if a separate plan to increase by 30% the down payment rate for car loans is dropped, he said.