Transition Challenges in Indonesia Automotive Industry: Electric Vehicles Set to Transform Supply Chains While ICE Aftermarket Remains Resilient

Jakarta, CNN Indonesia — The rapid rise of Battery Electric Vehicles (BEVs) in Indonesia has initiated a profound structural transformation across the nation’s automotive landscape, yet it has not immediately disrupted the foundational ecosystem of the supporting component industry. For automotive parts manufacturers and the aftermarket sector, the integration of EVs presents a complex duality: a technological challenge requiring substantial adaptation to new manufacturing standards, alongside a prolonged period of operational continuity driven by the enduring presence of internal combustion engine (ICE) vehicles.

Industry stakeholders emphasize that while electric mobility represents the inevitable future of global transportation, the localized reality in Southeast Asia’s largest economy dictates a more gradual transition. This measured pace offers the domestic component sector vital breathing room to adapt, modernize, and strategize for a future where electrification coexists with traditional automotive engineering for decades to come.

Understanding the Mechanics of Change: Component Disparity Between ICE and EV

To comprehend the ongoing evolution within Indonesia’s automotive supply chain, it is essential to examine the structural differences between traditional and electrified vehicles. According to official data from the Indonesian Ministry of Industry, a conventional vehicle powered by an internal combustion engine relies on approximately 30,000 distinct components to function seamlessly. These include intricate mechanical systems such as internal combustion engines, cylinder heads, manual and automatic transmissions, exhaust systems, hydraulic braking systems, spark plugs, fuel tanks, and complex fuel injection networks.

In stark contrast, a purely battery-electric vehicle requires significantly fewer parts, trimming the total component count down to roughly 20,000 items. This reduction of approximately 10,000 parts per vehicle stems from the elimination of the internal combustion engine and its associated peripheral systems. Without the need for pistons, camshafts, timing belts, radiators, exhaust pipes, and multi-speed transmissions, the mechanical footprint of a vehicle shrinks dramatically.

However, this simplification does not translate into an immediate collapse of the existing manufacturing ecosystem. The Association of Indonesian Automotive Industries and related component associations point out that the aftermarket and replacement parts sectors will remain robust due to the massive existing population of ICE vehicles already operating on Indonesian roads.

GIAMM Stance: Navigating the Pace of Penetration

Addressing the concerns surrounding the future of local auto parts makers, Yusak Kristian, Chairman of the Association of Indonesian Automotive Industries and Motor Vehicles (GIAMM), offered a pragmatic perspective during a recent industry briefing in Jakarta on Friday, September 18. He acknowledged that while the reduced component count in BEVs is a frequent topic of concern among manufacturers, the actual market penetration of electric vehicles in Indonesia faces distinct structural limitations.

"Indeed, when discussing EVs today, everyone questions this fact—that the number of components in an EV will be far lower than the number of components in an ICE vehicle," Yusak stated. "However, we also know that EV penetration will have its limitations. There is a ceiling, and it is impossible for EVs to completely replace ICE vehicles in a short span of time."

Yusak highlighted that the expansion of electric mobility in Indonesia is heavily dependent on infrastructural readiness, which extends far beyond the borders of major metropolitan hubs like Jakarta, Surabaya, and Bandung. The establishment of widespread public charging stations, grid capacity enhancements, and equitable energy distribution across the country’s thousands of inhabited islands present logistical hurdles that cannot be resolved overnight.

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

The Hybrid Bridge: Sustaining Component Manufacturing

A critical factor mitigating the disruption to Indonesia’s component industry is the intermediate role played by hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs). While BEVs rely entirely on battery power and electric motors, hybrid technologies combine traditional internal combustion engines with electric propulsion systems.

This technological bridge ensures that the demand for many conventional auto parts will persist well into the future. For component manufacturers producing engine blocks, fuel systems, and exhaust components, the transition period is effectively extended by the popularity of hybrids, which offer consumers a familiar refueling experience alongside improved fuel efficiency and reduced emissions.

"Some parts will continue to be used in both ICE vehicles and EVs," Yusak explained. "Especially for non-BEV powertrains like hybrids or PHEVs, many components remain identical to those used in traditional ICE vehicles."

Consequently, the reduction in component usage characteristic of pure battery-electric vehicles will not instantly dismantle the ICE-focused supply chain. As long as the transition phase remains active—driven by consumer preferences, purchasing power, and infrastructure constraints—the demand for replacement parts, maintenance services, and traditional manufacturing output will stay afloat.

Chronology of the Electric Vehicle Push in Indonesia

The dialogue surrounding component manufacturing takes place against the backdrop of Indonesia’s aggressive national strategy to position itself as a regional electric vehicle hub. The timeline of this transformation reflects a deliberate push by the Indonesian government to attract foreign investment, secure nickel reserves, and transition the domestic market toward green mobility:

• 2019: President Joko Widodo signed Presidential Regulation No. 55 of 2019 concerning the Acceleration of Battery Electric Vehicle Programs for Road Transportation. This foundational decree laid out incentives for EV manufacturers, local assembly requirements, and a roadmap for domestic component utilization (TKDN).
• 2021–2022: Major global automotive manufacturers began announcing investments in Indonesian manufacturing plants, focusing on hybrid models and preparatory lines for electric vehicle batteries. The Ministry of Industry intensified discussions with domestic suppliers regarding the inevitable shift in component demand.
• 2023: Sales of electrified vehicles—led primarily by hybrids and a growing share of imported and locally assembled BEVs—began to gain noticeable traction, crossing significant market share milestones driven by government tax incentives, luxury tax exemptions, and expanding charging networks in urban areas.
• 2024–Present: The industry entered a critical phase of evaluation. While vehicle sales figures for EVs show consistent upward trends, component manufacturers and industry bodies like GIAMM are actively lobbying for policy support, workforce retraining, and technological diversification to ensure small and medium enterprises (SMEs) in the supply chain are not left behind.

Economic Implications and the Road Ahead for Local Suppliers

The coexistence of ICE and electric vehicles creates a dual-track economic reality for Indonesia’s manufacturing sector. On one hand, large tier-one suppliers with substantial capital resources are already investing in research and development to produce electric motor components, power control units, and battery management systems. On the other hand, numerous tier-two and tier-three suppliers—many of which are local SMEs specializing in specific mechanical parts like gaskets, hoses, valves, and fasteners—face a stark strategic choice: adapt or obsolesce.

Economic analysts note that the government’s local content requirements (TKDN) serve as a crucial shield and catalyst for local industry. By mandating that a specific percentage of electric vehicles sold in Indonesia must be manufactured domestically using local components, the state encourages global original equipment manufacturers (OEMs) to partner with domestic suppliers. This policy forces the transfer of technology and helps bridge the gap between traditional mechanical engineering and modern electrochemical engineering.

Furthermore, the aftermarket sector is expected to experience a unique evolution. While BEVs require fewer routine maintenance procedures—such as oil changes, spark plug replacements, and exhaust repairs—they still rely heavily on high-wear components like tires, suspension systems, brake pads (though mitigated by regenerative braking), and steering assemblies. Suppliers specializing in these universal automotive parts are well-positioned to maintain steady revenues regardless of the underlying powertrain.

Conclusion: Managing a Managed Transition

The evolution of Indonesia’s automotive component industry is neither a sudden cliff nor a distant concern; it is a carefully calibrated transition. As articulated by industry leaders like Yusak Kristian and reinforced by governmental data, the complete phasing out of internal combustion engines is constrained by geographic realities, infrastructural development timelines, and consumer adoption rates.

For Indonesia’s robust automotive supply chain, the immediate future is characterized by adaptation rather than abandonment. By leveraging the interim strength of hybrid technologies, upgrading manufacturing capabilities to meet new EV standards, and capitalizing on the enduring aftermarket for traditional vehicles, the domestic component industry is charting a resilient course through one of the most significant industrial revolutions in modern history.