What To Know
- Indonesia has thrown down a direct challenge to Thailand’s decades-long dominance as Southeast Asia’s automotive manufacturing powerhouse, publicly urging Toyota Motor Corporation to shift its main regional production operations from Thailand to Indonesia.
- Purbaya said Indonesia was prepared to provide Toyota with the incentives necessary to support such a move, questioning why Thailand should remain ASEAN’s principal automotive manufacturing center when Indonesia has the region’s largest population and economy.
Indonesia has thrown down a direct challenge to Thailand’s decades-long dominance as Southeast Asia’s automotive manufacturing powerhouse, publicly urging Toyota Motor Corporation to shift its main regional production operations from Thailand to Indonesia.
Image Credit: Bangkok Business News
Indonesian Finance Minister Purbaya Yudhi Sadewa made the high-profile pitch while addressing automotive industry executives in Tangerang, offering substantial incentives to attract the Japanese giant. The proposal, this Bangkok Business News report notes, goes considerably further than securing another assembly plant, with Jakarta seeking Toyota’s suppliers and supporting industries as part of a broader effort to build an integrated automotive ecosystem.
Jakarta Makes Its Pitch to Toyota
Purbaya said Indonesia was prepared to provide Toyota with the incentives necessary to support such a move, questioning why Thailand should remain ASEAN’s principal automotive manufacturing center when Indonesia has the region’s largest population and economy.
“We are the largest country in ASEAN. Why should the center be in Thailand?” he said.
The minister acknowledged that Thailand had historically proved more successful in attracting international automakers because of its established industrial ecosystem, supplier network, export infrastructure and more competitive investment environment.
Indonesia, however, believes the competitive landscape is changing.
Indonesia Wants Toyota’s Supply Chain Too
Jakarta’s ambitions extend well beyond Toyota vehicle assembly. Purbaya wants component manufacturers and other suppliers to establish operations in Indonesia, reducing the country’s continuing dependence on imported automotive parts.
That could potentially attract investment across steel, electronics, chemicals, logistics and component manufacturing while creating a deeper domestic automotive supply chain.
Purbaya pointed to Hyundai’s investment in Indonesia as evidence that major international manufacturers can establish significant production operations in the country. The government is also working to simplify licensing procedures and reduce bureaucratic obstacles facing investors.
Indonesia says its automotive industry employs approximately 1.5 million people and has installed annual production capacity of around 2.5 million vehicles.
EV Incentives Add Pressure to Regional Rivalry
Among the incentives being promoted are a luxury goods sales tax exemption of up to 100% and a 40% government-borne VAT reduction for qualifying vehicles. The measures are focused on battery-electric vehicles, while hybrids and plug-in hybrids are excluded.
Final details are expected to be announced by Indonesian President Prabowo Subianto.
For Thailand, the proposal underlines intensifying competition for automotive and EV investment across Southeast Asia. Thailand retains formidable advantages built over decades, including established suppliers, skilled manufacturing capacity and export networks that cannot easily be replicated or relocated.
Crucially, Toyota has announced no decision to transfer its main regional manufacturing operations from Thailand, meaning Indonesia’s proposal remains an ambitious government pitch rather than an impending relocation.
Nevertheless, Jakarta’s unusually public challenge signals that competition for the future of ASEAN automotive manufacturing is accelerating, with investment incentives, EV policy, domestic market size and supply-chain depth increasingly determining which country gains the advantage.
