Auto Industry Leaders Warn EV Surge Could Trigger Layoffs, Call for Balanced Policy
Key Takeaways
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JAKARTA, Investortrust.id — Indonesia’s auto industry leaders have raised concerns that the rapid rise of electric vehicle, EV, sales could disrupt the national automotive ecosystem, risking factory underutilization, layoffs, and an uneven playing field between local producers and importers.
Secretary General of the Association of Indonesian Automotive Industries (Gaikindo) Kukuh Kumara said on Monday, Aug. 25, 2025, that the share of vehicles with high local content, known as Tingkat Komponen Dalam Negeri (TKDN), had been falling, while production of EVs with low domestic content had risen.
He warned that this shift could trigger job losses since most of Indonesia’s automotive workforce is employed by manufacturers that have invested in local factories. “Even some companies have already laid off workers because domestic sales declined and supply dropped,” Kukuh said at a discussion hosted by the Ministry of Industry in Jakarta.
Rising EV Sales, Falling Utilization
Government data showed the EV fleet surged to 207,000 units in 2024, up 78% from 116,000 units in 2023. The trend has challenged conventional automakers. Gaikindo estimated that plant utilization, which had briefly improved to 73%, risked slipping back to 55–60%.
Kukuh stressed that while exports of 400,000–500,000 units in 2025 had helped support the sector, domestic pressures remained intense. “Utilization that once reached 73% could decline again to 55–60%, and the labor absorption in this sector is very large,” he said.
Policy Criticism Over EV Import Incentives
Echoing industry concerns, University of Indonesia economist Riyanto argued that incentives for imported battery electric vehicles (BEVs) should be ended by 2026. He said such policies undermined investors who had committed to local production.
“If these incentives are extended, it will create unfairness and inconsistency, reduce policy credibility, and damage the investment climate. It is not aligned with the goal of making Indonesia a BEV production base,” Riyanto said.
As of May 2025, imported BEVs controlled 64% of the domestic market, up from 40.2% a year earlier. Riyanto stressed that the impact of these imports was largely confined to trade, with limited multiplier effects compared to domestic manufacturing.
He recommended a fiscal policy framework based on emissions reduction and local content, granting larger incentives to vehicles with higher environmental and economic contributions.
Japan’s Strategic Role and Concerns
Rachmat Gobel, Chairman of the Indonesia–Japan Parliamentary League and President of the Indonesia–Japan Friendship Association (PPIJ), urged the government not to overemphasize EVs at the expense of hybrid and hydrogen technologies.
“Don’t let EV trends dominate all attention. Hydrogen and hybrid technologies also deserve incentives and support,” Gobel said at the Indonesia–Japan Executive Dialogue 2025 in Jakarta on Wednesday, Aug. 6, 2025.
He underlined that Japanese automakers still accounted for nearly 88% of Indonesia’s light vehicle market and had created more than 250,000 jobs, building a robust supply chain structure over decades. Toyota led the market with a 33.4% share, followed by Daihatsu at 18.8%, Honda at 10.9%, and Mitsubishi at 8.3% in the first quarter of 2025.
“Japan has built a pyramid industry down to tier 3 suppliers. This has generated more than 250,000 jobs. It must be preserved,” Gobel stressed.
Balancing Transition with Industrial Development
Industry Minister Agus Gumiwang Kartasasmita has described Indonesia’s low car ownership ratio—99 units per 1,000 people—as a growth opportunity, particularly for Japanese manufacturers investing in local capacity.
Gobel added that building an industry meant not only setting up factories but also creating markets, developing human resources, and advancing domestic technology. “Policy must consider long-term competitiveness, not just follow global trends,” he said.
Together, Gaikindo, academic economists, and Japanese industry representatives have called for a recalibration of Indonesia’s auto policy. While EV adoption is a strategic step for emissions reduction, they warned that unbalanced incentives, heavy reliance on imports, and neglect of other technologies could weaken the national ecosystem and erode decades of industrial gains.
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