Indonesia’s electric vehicle (EV) transition is accelerating—but not without collateral damage. As imported battery electric vehicles flood the market, local auto parts manufacturers face shrinking demand, triggering layoffs and exposing structural weaknesses in the domestic supply chain. The tension between green mobility and industrial resilience is now at the heart of Indonesia’s automotive future.
Key Facts & Background
- EV Imports & Market Shift:
- Six foreign brands—BYD, VinFast, Geely, XPeng, GWM, and PT National Assemblers—entered Indonesia’s EV incentive program in 2025.
- EV wholesales reached 42,178 units (Jan–Jul 2025), nearly matching full-year 2024 sales of 43,188 units.
- Conventional vehicle sales declined 10.1% (wholesales) and 10.8% (retail) year-on-year.
- Impact on Local Component Industry:
- Gabungan Industri Alat Mobil dan Motor (GIAMM) confirms layoffs across member companies, with workforce reductions ranging from 3% to 23%.
- Drop in domestic vehicle production and rising imports of completely built-up (CBU) EVs and trucks reduce demand for local components.
- Supply to automakers from GIAMM members has significantly contracted.
- Policy Context & Industry Response:
- GIAMM urges government to revive tax incentives similar to PPnBM-DTP (luxury tax subsidy) used during the COVID-19 recovery.
- Gaikindo warns that high-local-content manufacturers are losing ground to low-TKDN EV imports, threatening industrial balance.
- Utilization rates in vehicle production dropped from 73% to an estimated 55–60%, risking broader employment impacts.
Strategic Insights
Indonesia’s push toward electric mobility is reshaping its automotive landscape—but the transition is exposing deep structural tensions between industrial policy, trade liberalization, and employment. While EV adoption is a strategic imperative for energy security and climate goals, the current import-heavy model risks undermining domestic manufacturing capacity.
The surge in CBU EV imports—many with minimal local content—has created a dual challenge. First, it displaces demand for locally sourced components, especially from tier 1 and tier 2 suppliers. Second, it pressures existing automakers who have invested in high-TKDN production, eroding their competitiveness. This imbalance threatens the viability of thousands of small and medium enterprises (IKM) embedded in the auto parts ecosystem.
Layoffs in the component sector are an early warning signal. With utilization rates falling and domestic sales declining, the ripple effects could extend to broader industrial employment and regional economies. The lack of granular data on job losses underscores a deeper issue: the absence of a coordinated monitoring and mitigation framework during this transition.
Strategically, Indonesia must recalibrate its EV policy to balance electrification goals with industrial resilience. Incentives should prioritize locally assembled EVs with high TKDN, not just imported models. A revival of PPnBM-DTP-style subsidies—targeted at vehicles with over 60% local content—could stimulate demand while protecting domestic suppliers.
Moreover, the government must accelerate the shift from CBU to CKD (completely knocked down) production. This requires investment in battery manufacturing, component localization, and workforce retraining. Without these, Indonesia risks becoming an EV consumer market rather than a production hub.
The export market offers a temporary cushion, but it cannot substitute for a healthy domestic ecosystem. Long-term competitiveness will depend on Indonesia’s ability to build a vertically integrated EV supply chain—from nickel processing to final assembly—anchored by robust local participation.
In essence, the EV transition must be inclusive. It should not sacrifice industrial jobs for short-term import gains. A balanced policy mix—combining incentives, protection, and investment—will be key to ensuring that green mobility also means sustainable employment and industrial sovereignty.