Vietnam Threatens Indonesia’s EV Ambitions as Japanese Auto Giants Eye Relocation and Spark Mass Layoff Fears

JAKARTA, Investortrust.id — Indonesia’s ambition to become the premier electric vehicle hub in Southeast Asia is facing a brutal reality check. Two massive Japanese automotive component manufacturers in East Java are prepared to abandon their local operations and relocate production to Vietnam, threatening to trigger thousands of industrial layoffs.

For global manufacturing investors, this early-stage exit warning exposes a critical gap in Indonesia's competitiveness. Despite aggressive government push to secure EV dominance, multinational supply chains are actively prioritizing Vietnam’s rapidly accelerating manufacturing framework. This capital flight signals that rising geopolitical friction and import-dependent bottlenecks are forcing global industrial giants to ruthlessly realign their operational footprints.

The EV Ecosystem Disconnect

The alarming intelligence came to light following field assessments by Said Iqbal, the newly appointed Special Advisor to the President on Labor Affairs and Worker Welfare. Speaking during a high-stakes press conference on Sunday, Iqbal revealed that the parent companies of these manufacturing hubs in Pasuruan and Mojokerto are aggressively shifting priorities toward electric vehicle components.

"Because of the uncertain war situation, principals in Japan will move to more productive countries and alter their product diversification," Iqbal stated on Sunday. He directly pointed out that Vietnam is securing these investments because its EV industrial cluster is developing at an explosive pace, whereas Indonesia's regional ecosystem is falling short on relative competitiveness. "Because this is a car industry, they will focus on electric cars. The development is being done in Vietnam, not in Indonesia," Iqbal added.

A Broader Manufacturing Contraction

The looming automotive exodus is part of a larger industrial storm hitting the country's manufacturing heartlands. Spillover effects from international tensions have introduced severe economic volatility, devaluing the rupiah and cutting deeply into the purchasing power of export-oriented factories.

Beyond the automotive sector, major employers like PT Fengtai, a prominent athletic footwear supplier for global brand Nike in West Java, have already been forced to furlough 4,000 workers due to evaporating order books and raw material supply shocks. Concurrently, paper manufacturer PT Pakerin in Mojokerto is facing operational paralysis, trapping 2,500 jobs, because an eye-watering sum of nearly Rp 1 trillion ($62.8 million) in working capital remains frozen inside a liquidated commercial bank.

Government Mounts Emergency Response

To stem the bleeding, the administration is shifting into an active crisis management mode rather than waiting for structural damage to spread. Iqbal plans to personally brief President Prabowo Subianto on these industrial threats, targeting fiscal workarounds to keep foreign companies grounded in the country.

"From the initial information when I went to East Java, there are two giant automotive component companies that could impact thousands of workers," Iqbal warned during his press briefing on Sunday, emphasizing the gravity of the situation. The government's mitigation strategy will involve pushing for corporate tax relaxations, mobilizing labor unions to negotiate directly with Japanese corporate boards, and coordinating with the Ministry of Manpower to ensure strict protection of worker rights during these turbulent transitions.