Downstreaming or Delocalising? Indonesia’s Electric Vehicle Transition Dilemma

Joshua Walker and Suharko

Bulletin of Indonesian Economic Studies, 2026, vol. 62, issue 1, 109-132

Abstract: Indonesia’s downstreaming program aims to transform its nickel mining and processing sectors and promote a battery electric vehicle (BEV) transition. This article presents evidence from interviews with automotive industry stakeholders to make two core arguments about the BEV transition. First, we argue that the reluctance of Indonesia’s established Japanese-led automotive production networks to produce BEVs means that the transition has relied on imported Chinese BEVs and locally assembled BEVs made from overwhelmingly foreign-sourced components. This has created a dilemma for the state: promoting the BEV transition risks driving the delocalisation of Indonesia’s automotive industry, while supporting established Japanese manufacturers risks stalling the transition. Second, we argue that the state’s capacity to manage this dilemma has been constrained by key government agencies’ institutional and political distance from substantial manufacturing interests. These arguments contribute to scholarly analysis of downstreaming and to debates about the state’s role in promoting automotive industrialisation.

Date: 2026
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DOI: 10.1080/00074918.2025.2602817

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Bulletin of Indonesian Economic Studies is currently edited by Firman Witoelar Kartaadipoetra, Arianto Patunru, Robert Sparrow, Sarah Xue Dong and Sean Muir

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