Indonesia's efforts to become a global electric vehicle production base have been promoted by the government in recent years.

Support for battery factory investments, the development of an electric vehicle ecosystem, and the entry of various Chinese automotive brands form part of this strategy.

However, despite the inflow of investment, Indonesia is still considered to face challenges in becoming not only a market for electric vehicles, but also a production centre with global competitiveness. This was stated by Heiwai Tang while responding to a question regarding the long-term impact of the entry of Chinese automotive brands into Indonesia on the development of the domestic automotive industry.

Heiwai Tang is the Victor and William Fung Professor in Economics and director of the Asia Global Institute at The University of Hong Kong.

According to him, industrial policies need to be designed in a balanced manner to increase productivity while creating employment opportunities.

"I think industrial policy should be designed to strike a good balance between increasing productivity and employment," said Prof. Tang in Jakarta on May 13th, 2026.

He stated that overly protective policies could create a protected environment for local companies in the short term.

However, such conditions could risk hampering industrial competitiveness over the long term. "If policies are too protective, in the long run, they can create a protected market for local companies, but they are actually bad for productivity and economic development," he said.

Prof. Tang said that maintaining open markets for global companies is one approach to supporting long-term economic development. In this way, Indonesia could benefit from technology and knowledge transfer from foreign companies entering the country.

"The most sustainable way for long-term economic development is to maintain open markets, attract the best foreign companies, and then transfer knowledge and technology to the local economy," he said.

He further added that technology transfer is important for Indonesia's ability to create higher-skilled jobs and increase industrial productivity. The statement is relevant to Indonesia's plans to become part of the global electric vehicle supply chain. Indonesia also holds substantial nickel reserves, which are a key raw material for electric vehicle batteries.

At the same time, the entry of Chinese automotive brands such as BYD, Chery, Geely and GAC Aion has also brought investment in electric vehicle manufacturing and assembly operations to Indonesia.

However, the next challenge will be ensuring that investment does not remain limited to sales and assembly activities, but also contributes to strengthening local industrial capabilities, including components manufacturing, research and human resource development.