Japanese automotive companies have voiced concerns over Indonesia’s plan to increase local content requirements for electric vehicles (EVs), amid the Southeast Asian country’s efforts to expand its EV industry. The issue surfaced during discussions between Japanese industry representatives and Indonesian government officials in Nagoya, Japan, on Saturday.
Indonesia intends to raise the local content threshold, known as TKDN, from 40% to 60% starting January 1, 2027, for domestically produced battery electric vehicles, including both four- and two-wheelers. This measure is part of a broader regulatory strategy to deepen the country’s EV supply chain as outlined in Industry Ministry Regulation No 6/2022. The requirement is expected to further increase to 80% by 2030.
The meeting included executives from several Japanese-affiliated companies with operations in Indonesia, such as PT Toyota Motor Manufacturing Indonesia, PT Denso Indonesia, PT Aisin Indonesia, and PT Advics Manufacturing Indonesia. Discussions focused on licensing, financing options for small and medium-sized suppliers, and the certification process for local content compliance, amid Indonesia’s transition to greater EV production.
According to Susiwijono Moegiarso, secretary of the Office of the Coordinating Economy Minister, the government appreciates the feedback and remains committed to refining policies to support industry growth. Moegiarso indicated that ongoing investment barriers would be addressed with targeted measures.
Indonesia has long employed local content rules to shield domestic industries and incentivize manufacturers to establish production and supply chains within the country. The initial 40% threshold was aimed at developing the EV market and attracting foreign investment. Higher thresholds in the coming years are intended to encourage deeper integration of local suppliers into automotive manufacturing.
Despite these measures, integration between EV manufacturers and domestic suppliers remains limited. A government source noted that while many companies have reported meeting existing local content levels, challenges persist in expanding supply chain localization.
The increasing local content requirements reflect Indonesia’s strategic ambition to capture greater value from EV production and reduce dependence on imported components, aligning with its broader industrial policy goals. However, Japanese manufacturers’ concerns highlight the complexities investors face in adapting to evolving regulatory frameworks while maintaining production efficiency and cost competitiveness.