Indonesia asks Toyota to move main production hub out of Thailand

Indonesia's finance minister has urged Japanese carmaker Toyota to move its primary manufacturing facility from Thailand to Indonesia, offering the company incentives to facilitate a potential relocation. The proposal was made during the Gaikindo Indonesia International Auto Show in Tangerang on August 4, where Finance Minister Purbaya Yudhi Sadewa addressed a group of Toyota executives.

Purbaya emphasized that Indonesia would provide all necessary incentives and support for the move, including a luxury goods sales tax exemption of up to 100% and a 40% government-borne VAT reduction for qualifying vehicles. These measures specifically apply to battery electric vehicles, excluding hybrids and plug-in hybrids. He also highlighted the country's larger domestic market and its growing incentives for battery electric vehicles as additional factors to attract automotive investment.

Purbaya contended that Thailand was once chosen by Toyota due to insufficient incentives and a weaker investment climate in Indonesia. However, he argued that these conditions have since improved, and Indonesia, being the largest country in ASEAN, should be the primary manufacturing hub. He cited Hyundai's manufacturing investment in Indonesia as evidence of the country's ability to attract major carmakers.

The automotive sector in Indonesia accounts for about one-fifth of the economy, employs 1.5 million people, and has a production capacity of 2.5 million vehicles per year. The proposed incentive package was to be finalized by Indonesian President Prabowo Subianto. As of now, Toyota has not responded to the proposal or announced any plans to relocate its manufacturing operations from Thailand.

Thailand has long been a major automotive manufacturing base in Southeast Asia, supported by various incentives aimed at attracting manufacturers and their supply chains.