Transition of the Indonesian Automotive Component Industry Amid the Rise of Electric Vehicles

Jakarta, CNN Indonesia — The rapid global and domestic surge in electric vehicle adoption has introduced profound structural questions for traditional manufacturing economies, particularly in the automotive supply chain. In Indonesia, the steady rise in battery electric vehicle (BEV) sales has not yet fundamentally disrupted or dismantled the domestic component industry. For automotive parts manufacturers and the broader aftermarket sector, the transition toward electrification represents a multifaceted challenge that requires strategic technological adaptation, particularly in managing the evolving landscape of spare parts and aftermarket services.

Industry stakeholders note that while the shift toward zero-emission mobility is irreversible, the operational realities on the ground present a more gradual transitional timeline than many initial projections suggested. The primary structural difference between internal combustion engine (ICE) vehicles and BEVs lies in mechanical complexity. Traditional vehicles are intricate assemblies comprising tens of thousands of moving parts, whereas electric vehicles feature significantly fewer components due to the absence of traditional internal combustion engines, complex transmissions, and exhaust systems. Despite this fundamental mechanical disparity, industry leaders maintain that the conventional spare parts business for ICE vehicles is far from facing an immediate or sudden obsolescence.

The Perspective of Industry Leadership on Market Penetration

Yusak Kristian, Chairman of the Association of Indonesian Automotive and Motorcycle Component Industries (GIAMM), addressed these concerns during a media discussion in Jakarta. He acknowledged that while the reduced component count of BEVs is a frequent topic of discussion among industry stakeholders, the actual market penetration of pure electric vehicles faces tangible geographical and infrastructural limitations across the vast Indonesian archipelago.

"Indeed, when talking about EVs today, everyone questions this because the number of components in an EV will be much lower than the number of components in an ICE vehicle," Yusak stated in Jakarta. "However, we also know that EV penetration will have its limitations; there is a limit, and it is impossible for EVs to replace ICE vehicles in a short span of time."

Yusak emphasized that the widespread adoption of electric vehicles in Indonesia remains bottlenecked by the uneven development of supporting infrastructure outside major metropolitan areas. Charging stations, specialized maintenance facilities, and power grid readiness vary drastically between major urban centers like Jakarta and regional provinces across the archipelago.

"Certainly, infrastructure and other supporting elements will not develop as rapidly as what we currently witness in major cities," he added.

The Crucial Role of Hybrid Technologies in the Transition Phase

A critical nuance in the domestic component manufacturing debate is the categorization of electrified vehicles. While pure BEVs drastically reduce the demand for traditional mechanical components, hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) continue to rely heavily on conventional internal combustion engines alongside their electric powertrains. Because of this architectural crossover, a vast majority of existing component manufacturing lines remain viable and necessary.

Yusak pointed out that the domestic supply chain will continue to see robust demand for shared components utilized across both ICE vehicles and hybrid systems.

"And several parts will continue to be used, both for ICE vehicles and EVs—especially if it is not a BEV, such as a hybrid or a plug-in hybrid electric vehicle. Many of those components are still identical to ICE vehicles," Yusak explained.

Given this transitional automotive ecosystem, the reduction of component usage in pure BEVs will not translate to an immediate collapse of the ICE-focused spare parts industry. GIAMM underscores that as long as the multi-decade transition period toward full electrification remains underway, consumer demand for replacement parts, maintenance services, and mechanical overhauls for conventional and hybrid vehicles will persist at profitable scales.

"So, while BEVs do require fewer components, their market penetration will take time and will not happen overnight," he reiterated.

The Scale of Component Disruption: Quantifying the Shift

The concerns articulated by industry associations are supported by official government assessments. The Indonesian Ministry of Industry (Kemenperin) has previously released comprehensive analyses detailing the structural transformation that the domestic manufacturing sector will undergo as electric vehicles capture a larger market share.

According to data from the Ministry of Industry, approximately 10,000 traditional vehicle components are projected to disappear or become obsolete with the mainstreaming of pure electric vehicles in the domestic market. A standard conventional vehicle is typically supported by roughly 30,000 distinct components, whereas a pure electric vehicle requires only about 20,000 components.

The items slated for structural decline include highly specialized mechanical and thermal management parts, such as engine cylinder heads, manual transmissions, exhaust systems, hydraulic braking systems, spark plugs, and fuel tanks. These components form the backbone of the traditional Tier-1, Tier-2, and Tier-3 automotive supply chains in Indonesia, which have spent decades building local content value through domestic procurement mandates.

The loss of these components presents a significant operational pivot for local manufacturers. Many small and medium-sized enterprises (SMEs) operating within the automotive supply chain rely exclusively on supplying specialized machining, casting, and forging services tailored specifically to internal combustion engines. Without targeted government intervention, retraining programs, and financial incentives to pivot toward new technologies—such as battery thermal management systems, lightweight composite structures, and power electronics—a portion of the domestic supply chain risks being left behind.

Chronology of Indonesia’s EV Transition and Policy Framework

To understand the current state of the Indonesian component industry, it is necessary to examine the regulatory trajectory that brought the country to this juncture. Indonesia has aggressively positioned itself as a strategic hub for electric vehicle production in Southeast Asia, leveraging its massive reserves of nickel—a critical raw material for lithium-ion battery production.

The policy push began in earnest with Presidential Regulation (Perpres) No. 55 of 2019 on the Acceleration of Battery Electric Vehicle Program for Road Transportation. This foundational decree established targets for domestic EV production, local content requirements (TKDN), and various fiscal incentives designed to attract foreign direct investment from global automotive giants, primarily from South Korea, Japan, China, and Western nations.

Between 2020 and 2022, the government focused heavily on establishing upstream capabilities, notably mineral processing facilities for nickel smelting and bilateral agreements to build integrated electric vehicle supply chains, spanning from raw material extraction to precursor production, cathode manufacturing, and battery cell assembly.

By 2023 and into 2024, the focus shifted toward downstream adoption. The government introduced various consumer subsidies, value-added tax (VAT) reductions for locally manufactured electric cars that met specific TKDN thresholds, and public fleet electrification mandates. These policies successfully stimulated double-digit growth in BEV sales year-on-year, though pure electric vehicles still represent a single-digit percentage of total annual vehicle sales in Indonesia, which remain dominated by affordable multi-purpose vehicles (MPVs) powered by ICE and hybrid engines.

Economic Implications and Strategic Imperatives for Aftermarket Suppliers

The coexistence of ICE, hybrid, and electric vehicles creates a complex operational environment for the aftermarket and spare parts sector. While the primary manufacturing sector focuses on vehicle assembly lines, the aftermarket industry sustains millions of jobs through independent repair shops, authorized service networks, and retail spare parts distributors.

Economic analysts observe that the aftermarket sector in Indonesia enjoys a natural buffer. Because the average age of vehicles on Indonesian roads tends to be relatively high compared to developed nations, the existing fleet of ICE vehicles will require maintenance, repairs, and spare parts replacement for well over a decade after new ICE sales eventually peak and decline. This rolling horizon provides component manufacturers and aftermarket suppliers with a critical window of financial stability to finance research and development, upgrade manufacturing capabilities, and gradually diversify their product portfolios.

However, business analysts warn that complacency could prove fatal for domestic suppliers. To remain competitive, local component manufacturers must proactively engage in technological diversification. This involves shifting capital expenditures toward the production of universal EV components that remain necessary regardless of the powertrain—such as suspension systems, steering mechanisms, braking hardware (adapted for regenerative braking systems), tires, interior electronics, and advanced driver-assistance systems (ADAS) peripherals.

Furthermore, workforce upskilling remains an urgent priority. Traditional mechanics and factory technicians trained in diagnosing engine faults, fluid replacements, and transmission repairs must be retrained to handle high-voltage electrical systems, battery diagnostics, and software-defined vehicle architectures. Institutions such as the Ministry of Industry’s vocational training centers have slowly begun rolling out specialized curricula, but industry leaders stress that the scale of the training must accelerate to match the ambitions of national automotive roadmaps.

Conclusion and Future Outlook

The trajectory of Indonesia’s automotive component industry is defined by a managed transition rather than an abrupt replacement. While the numerical reduction in components required for battery electric vehicles is an undeniable engineering reality, the unique socioeconomic and geographical landscape of Indonesia ensures that internal combustion engines and hybrid powertrains will remain dominant fixtures of the national transportation grid for many years to come.

As articulated by GIAMM and supported by macroeconomic data, the component industry has breathing room—not to stand still, but to execute a calculated evolution. The coexistence of legacy manufacturing and green mobility demands strategic foresight, robust public-private collaboration, and targeted investments in innovation. By capitalizing on the extended lifespan of the existing ICE fleet while simultaneously integrating into the burgeoning regional EV supply chain, Indonesia’s component sector aims to safeguard its industrial workforce and maintain its position as a vital pillar of the national economy.