Japanese Auto Parts Makers Eye Vietnam Shift, Raising Risks for Indonesian Manufacturing Jobs

JAKARTA — Two major Japanese‑owned automotive component manufacturers operating in East Java are actively considering shifting part of their production operations to Vietnam, a strategic move that could threaten thousands of jobs in Indonesia. The development comes as regional competition intensifies over the growing electric vehicle (EV) supply chain, highlighting how policy environments and operational costs are reshaping investment decisions across Southeast Asia.

Said Iqbal, Chairman of the Confederation of Indonesian Trade Unions (KSPI), raised the alert following recent visits to industrial zones in East Java. He confirmed that the facilities in question are located in Pasuruan and Mojokerto, both key hubs for automotive manufacturing in the province, and are part of well‑established Japanese industrial groups. According to early information gathered by union representatives, the companies are reviewing their regional footprint as they transition their focus toward producing components for electric vehicles rather than traditional internal combustion engines.

“During my visit to East Java, I received preliminary reports that these two large automotive suppliers are evaluating changes to their operations,” Said Iqbal stated in a virtual briefing on Sunday. “If plans to relocate part of their production move forward, thousands of local workers could face the risk of reduced hours or layoffs.”

He explained that the shift is being driven by a combination of global market changes and differing national strategies. As automakers around the world accelerate their move toward electrification, component producers are adjusting their manufacturing bases to align with markets that offer stronger incentives, more streamlined regulations, and a more developed ecosystem for EV production. In this context, Vietnam is increasingly viewed by many international firms as a more competitive destination.

“The situation remains uncertain, but it is prompting decision‑makers in Japan to look toward countries that offer higher productivity and clearer long‑term policies,” Said Iqbal. “These companies are refocusing their investments on electric vehicle technology, and right now they see Vietnam as a more favorable location to develop this segment compared to Indonesia.”

He emphasized that the discussions are still in the early stages and no final decision has been made. “This is only preliminary information, and talks are still ongoing. It is not a full closure or complete relocation, only a portion of their production lines that may be moved. Even so, the impact on local employment and industrial activity could still be significant if the plan proceeds.”

The development highlights a growing concern among industry stakeholders: that while Indonesia holds advantages in raw materials such as nickel, a critical input for EV batteries, it has struggled to match Vietnam’s speed in building a complete manufacturing ecosystem, improving logistics efficiency, and offering stable, investor‑friendly policies. This gap is becoming more visible as global supply chains become more specialized and location‑sensitive.

In response, Said Iqbal is calling on the Indonesian government to act quickly to strengthen its industrial framework. He urged policymakers to review existing regulations, improve infrastructure connectivity, and introduce more targeted incentives to attract and retain investment in the EV sector. “We need clear, consistent policies that reassure investors and help local workers remain competitive. If we do not act now, we risk losing more manufacturing jobs to neighboring countries,” he said.

To follow up on the issue, he confirmed that he will formally raise the matter directly with President Prabowo Subianto, as well as State Secretary Prasetyo Hadi and Deputy Speaker of the House Sufmi Dasco Ahmad. At the same time, union representatives will open communication channels with company management to seek clarity on plans and negotiate protections for workers.

Broader Challenges in the Manufacturing Sector

The potential shift in the automotive industry comes as another major segment of Indonesia’s manufacturing sector faces its own set of challenges. In West Java, around 4,000 workers at a large footwear factory have been placed on temporary leave following the completion of existing production orders, with no new contracts yet confirmed.

The facility, operated by Feng Tay Indonesia Enterprises, is a key supplier to global sportswear brands including Nike and Puma. With a total workforce estimated between 14,000 and 17,000 employees, the temporary suspension of work for such a large group signals volatility in the global supply chain, where orders can fluctuate based on market demand and shifting production costs.

“Approximately 4,000 employees in the Bandung Regency area are currently on standby as they wait for new orders to come in,” Iqbal explained. “This situation creates uncertainty for the workers and their families, as income stability is affected until production resumes.”

He added that a joint inspection team, including representatives from the Ministry of Manpower, local government officials, and labor union leaders, will visit the factory in the coming days to assess the situation firsthand. The goal is to find solutions that minimize financial hardship for employees and encourage the company to maintain its workforce as much as possible.

Taken together, these developments paint a broader picture of the pressures facing Indonesia’s manufacturing sector. As the global economy evolves and industries shift toward new technologies and production models, the country faces the challenge of adapting its policies and infrastructure to remain an attractive destination for investment while also protecting the livelihoods of millions of workers who depend on these industries.