The Association of Indonesian Motorcycle Industry (AISI) is developing a strategy to increase the use of locally manufactured components to meet the minimum domestic component level (TKDN) requirement of 60% by 2027.

The strategy includes assembling batteries in Indonesia and modifying production processes among member manufacturers, including Honda and TVS, in accordance with government regulations.

Yosef Utama, Head of Commercial Affairs at AISI, explained that batteries are an important component in meeting the revised requirement. Manufacturers must increase local content to comply with the planned rise in the TKDN threshold from 40% to 60%. However, domestic battery assembly will depend on market demand and the feasibility of achieving sufficient production volumes.

"Local battery assembly is underway. The key is ensuring market volume and economies of scale," said Yosef Utama, Head of Commercial Affairs at AISI.

Several manufacturers have begun assembling or packaging batteries in Indonesia. However, this does not necessarily mean that all major battery components are manufactured locally, as battery cells are still largely imported. According to Yosef, the higher TKDN requirement is expected to encourage manufacturers to expand domestic production, particularly of battery components, to comply with government regulations.

"Because batteries are a key component in the 60 percent TKDN requirement, this regulation will encourage manufacturers, currently like Honda and TVS, to localise components and assemble batteries domestically," said Yosef Utama.

The expansion of battery assembly facilities will depend on the market's capacity to absorb production. Sufficient demand is necessary to support investment in manufacturing facilities and the development of local supply chains at viable production volumes.

The Indonesian government has progressively increased domestic content requirements for electric vehicles. For the 2022-2026 period, the minimum TKDN threshold used as a reference for government subsidy and incentive programmes is 40%. This is scheduled to increase to at least 60% for the 2027-2029 period.

From 2030, the TKDN threshold is planned to rise further to 80%. Several local electric two-wheeler manufacturers and brands affiliated with the Indonesian Electric Motorcycle Industry Association (Aismoli), in addition to AISI members, are reported to have already exceeded the 40% TKDN threshold. However, meeting the existing requirement does not necessarily mean that all manufacturers will be able to comply with the 60% threshold by 2027.

For AISI members, meeting the next target will require supply chain readiness and production cost management to maintain competitiveness. Market demand will remain a key factor in determining the viability of investments in component localisation, particularly battery production.