Indonesia’s battery manufacturing capacity is scaling rapidly as the country leverages its nickel resources to capture greater value in the electric vehicle supply chain. ProSpace Indonesia’s EV Ecosystem Report indicates that battery production capacity will reach 35 gigawatt-hours annually by end-2025, a threefold increase from 2023.
South Korean, Chinese, and domestic companies lead development, with investment values in battery manufacturing and supporting industries totaling $12.7 billion since 2022. The Indonesia Battery Corporation’s first major facility in Central Java reached full production in March, while three additional plants are under construction.
“Indonesia is successfully implementing its strategy to move up the value chain from raw nickel exports to finished battery cells and packs,” notes Dewi Lestari, EV Industry Analyst at ProSpace. “The vertically integrated ecosystem from mining to cell production creates significant cost advantages.”
Technological focus remains primarily on nickel-based lithium-ion batteries, with research into sodium-ion and solid-state technologies advancing through university-industry partnerships. Battery recycling capacity is developing in parallel, with three facilities now operational.
Electric vehicle production within Indonesia continues to expand, with 78,000 units manufactured in 2024, more than double the previous year’s output. Domestic sales account for 59% of production, with the remainder exported primarily to Southeast Asian markets.
Challenges include ensuring environmental standards in the upstream supply chain and developing specialized workforce capabilities, issues being addressed through certification programs and targeted educational initiatives.
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Indonesia is intensifying development of its world-leading geothermal resources, with installed capacity projected to reach 3.7 gigawatts by the end of 2025, according to ProSpace Indonesia’s Renewable Energy Outlook. This represents a 32% increase from 2023 levels, cementing Indonesia’s position as the second-largest geothermal power producer globally.
Fifteen new geothermal projects are currently under development, with combined investment values exceeding $4.8 billion. The government’s Geothermal Drilling Fund has proven effective in mitigating exploration risks, funding 23 successful exploratory wells since its establishment.
“Geothermal represents Indonesia’s unique competitive advantage in the renewable energy transition,” explains Hendra Nugraha, Geothermal Energy Specialist at ProSpace. “It provides consistent baseload power that complements intermittent solar and wind resources while utilizing Indonesia’s natural volcanic geography.”
Technology advances have reduced development costs by approximately 15% since 2020, while improved drilling techniques have increased success rates from 72% to 83% over the same period. Binary cycle plants, which can generate electricity from lower-temperature resources, are expanding the viable resource base.
Environmental impact assessments have become more sophisticated, with particular attention to conserving forest areas around geothermal sites. Carbon credit mechanisms increasingly support project economics, with certified emissions reductions valued at approximately $28 million in 2024.
Progress remains slower than targeted due to complex permitting processes and challenging terrain at many sites, issues being addressed through regulatory reforms.
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Indonesia’s coal industry is pursuing strategic diversification as energy transition policies impact long-term demand prospects. ProSpace Indonesia’s Coal Sector Analysis reveals that 68% of major coal producers have established significant business lines beyond traditional thermal coal mining.
Production volumes remained stable at 612 million tonnes in 2024, with export values of $26.8 billion representing a 6.2% decline from 2023 despite steady volumes, reflecting price pressures. China, India, and Southeast Asian nations continue as primary export markets.
“Leading coal companies are reinventing themselves as broader energy providers rather than pure coal producers,” notes Dr. Gunawan Wibisono, Energy Resources Expert at ProSpace. “We’re seeing investments in renewable energy, coal gasification, coal-to-chemicals, and electricity generation as diversification strategies.”
The government’s domestic market obligation policy, requiring 25% of production for local use, provides stable demand while supporting coal gasification initiatives. Five major gasification projects are currently under development, aimed at reducing Indonesia’s liquefied petroleum gas imports.
Mining operations increasingly implement automation and digitalization to improve efficiency and safety, with remote-operated equipment now utilized in 37% of large-scale mines. Meanwhile, mine rehabilitation efforts have accelerated, with 42,000 hectares undergoing restoration in 2024.
Employment in the sector has declined by 8.3% over two years as efficiency measures and automation reduce workforce requirements, prompting government-backed retraining initiatives for affected communities.
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Indonesia’s renewable energy sector attracted unprecedented investment in 2024, with $6.2 billion committed to projects across solar, wind, hydro, and geothermal technologies. ProSpace Indonesia’s Energy Investment Report reveals this represents a 78% increase compared to 2023 figures.
Solar power leads growth with 2.8 gigawatts of new capacity under development, primarily through utility-scale projects in Eastern Indonesia. Meanwhile, the country’s first major offshore wind project broke ground off North Java, set to deliver 1.2 gigawatts upon completion in 2027.
“Indonesia is reaching a tipping point where renewable energy is not just environmentally preferable but economically advantageous,” explains Rina Wijaya, Energy Transition Analyst at ProSpace. “Declining technology costs, supportive policies, and corporate sustainability commitments are creating ideal conditions for accelerated deployment.”
The government’s updated energy mix targets aim for 35% renewable generation by 2030, up from the previous 23% target. Power purchase agreement terms have been standardized and streamlined, reducing negotiation timeframes by an average of 8 months.
International climate finance plays a significant role, with Indonesia securing $3.5 billion through Just Energy Transition Partnership arrangements. Meanwhile, domestic banks have expanded green lending portfolios by 124% in two years.
Challenges include grid integration capabilities and land acquisition processes, which government initiatives are addressing through infrastructure upgrades and regulatory reforms.
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Indonesia’s food processing industry is undergoing rapid transformation through innovation and capacity expansion, according to ProSpace Indonesia’s Food Manufacturing Report. The sector grew by 9.3% in 2024, outpacing GDP growth and creating 78,000 new jobs.
Processed food exports reached $10.2 billion, with halal-certified products, palm oil derivatives, processed seafood, and instant noodles as leading categories. New markets in Africa and Central Asia show the strongest growth rates, while traditional export destinations in ASEAN and the Middle East remain stable.
“We’re witnessing unprecedented product innovation driven by changing consumer preferences and improved manufacturing capabilities,” notes Budi Santoso, Food Industry Analyst at ProSpace. “Plant-based alternatives, functional foods, and premium versions of traditional Indonesian products show particular promise.”
Technology adoption accelerates, with 63% of medium and large food processors implementing advanced automation in the past two years. Quality control systems utilizing artificial intelligence for visual inspection are becoming standard in export-oriented facilities.
Packaging innovation focuses on sustainability, with biodegradable materials and reduced plastic use addressing both regulatory requirements and consumer preferences. Meanwhile, cold chain infrastructure improvements have expanded distribution capabilities for perishable processed foods.
Challenges include raw material price volatility and increasingly stringent food safety standards in export markets. Industry leaders are responding through vertical integration and enhanced quality management systems.
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Indonesia’s furniture industry is experiencing robust export growth as manufacturers successfully target premium market segments in North America and Europe. ProSpace Indonesia’s Export Market Analysis shows furniture exports reached $3.8 billion in 2024, a 17.2% increase compared to the previous year.
Solid wood furniture leads the growth, with products incorporating traditional craftsmanship and sustainable materials commanding premium prices in destination markets. Outdoor furniture, particularly teak products, has seen the strongest demand increase at 28% year-on-year.
“Indonesian furniture makers have successfully repositioned from mass-market suppliers to creators of distinctive, higher-value products,” explains Diana Purnomo, Furniture Industry Expert at ProSpace. “Design collaboration with international designers while maintaining authentic Indonesian elements has proven particularly successful.”
Sustainability certifications play a crucial role in market access, with 72% of export-oriented manufacturers now holding Forest Stewardship Council certification for their supply chains. Digital manufacturing technologies including computer-aided design and CNC machining are increasingly utilized alongside traditional craftsmanship.
Domestic market growth remains strong at 14.3% annually, driven by residential construction and hospitality sector development. E-commerce channels now account for 37% of domestic furniture sales, enabling manufacturers to capture higher margins through direct-to-consumer models.
Labor productivity has improved by 23% over five years through skills development programs and process improvements, helping maintain competitiveness despite rising wages.
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Indonesia’s electronics manufacturing sector is evolving beyond assembly operations to include higher-value activities, according to ProSpace Indonesia’s Electronics Industry Assessment. Component manufacturing and design services now contribute 34% of the sector’s value, up from 17% in 2023.
The industry employs approximately 485,000 workers across 720 companies, with production values reaching $19.7 billion in 2024. Smartphone assembly remains the largest segment, accounting for 37% of output, while household appliances, audio equipment, and industrial electronics show the strongest growth rates.
“Indonesia is moving up the electronics value chain through targeted investments in capabilities beyond final assembly,” notes Indra Kusuma, Electronics Industry Analyst at ProSpace. “We’re seeing the emergence of specialized clusters focusing on specific component categories.”
Batam island continues to strengthen its position as an electronics manufacturing hub, benefiting from proximity to Singapore’s logistics network and free trade zone status. Meanwhile, new industrial parks in Central Java are attracting electronics manufacturers seeking competitive labor costs and reliable infrastructure.
South Korean and Taiwanese companies lead foreign direct investment in the sector, with semiconductor packaging operations and printed circuit board manufacturing expanding most rapidly. Local companies increasingly participate as second and third-tier suppliers while developing original design manufacturing capabilities.
Government incentives for research and development activities have stimulated innovation, with 38 electronics patents filed by Indonesian companies in 2024, compared to just 11 in 2022.
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Indonesia’s automotive sector is achieving unprecedented levels of domestic content in vehicle production, according to ProSpace Indonesia’s Automotive Industry Report. Local components now account for 86% of production value in domestically assembled vehicles, up from 74% in 2023.
The localization push has created an estimated 45,000 new jobs in the component manufacturing ecosystem while reducing import dependency. Major international automakers have established or expanded component manufacturing facilities, with Japanese and Korean companies leading investments totaling $1.9 billion over the past 18 months.
“We’re witnessing the maturation of Indonesia’s automotive manufacturing capabilities,” explains Hendri Wijaya, Automotive Industry Specialist at ProSpace. “The component ecosystem now offers quality and cost advantages that make Indonesia increasingly attractive as a regional production hub.”
Electronic components show the strongest localization growth, with local production of wire harnesses, sensors, and control units expanding by 63% since 2023. Meanwhile, battery production capacity has tripled to support growing electric vehicle assembly.
Vehicle production reached 1.45 million units in 2024, with domestic sales accounting for 65% and exports reaching 490,000 units, primarily to Southeast Asian and Australian markets. The government’s tax incentives for locally produced vehicles have effectively stimulated demand while supporting the manufacturing ecosystem.
Challenges include adapting to rapid technological changes and developing specialized engineering talent needed for advanced component production.
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Indonesia’s textile and garment industry is undergoing strategic repositioning to maintain competitiveness in a challenging global landscape. ProSpace Indonesia’s Manufacturing Competitiveness Report indicates that the sector grew by a modest 3.2% in 2024, focused primarily on value-added products and domestic market opportunities.
Export performance varies significantly by product category, with technical textiles and specialized fabrics showing 18% growth while basic apparel exports contracted by 5.7%. Overall, the industry contributed $13.8 billion to export earnings last year.
“Indonesian manufacturers are finding success by focusing on market segments where proximity, quality, and flexibility matter more than absolute cost,” notes Fajar Santoso, Manufacturing Industry Analyst at ProSpace. “Sustainability credentials are increasingly becoming a competitive advantage.”
Labor costs, which have risen by an average of 8.5% annually over the past five years, continue to challenge pure cost competitiveness against producers in Bangladesh and Ethiopia. In response, industry leaders are investing in automation, with robotic cutting and sewing systems now implemented in 38% of large textile operations.
The domestic market offers growth potential, with local brands gaining market share and “Made in Indonesia” campaigns resonating with increasingly nationalistic consumers. Online direct-to-consumer channels now account for 27% of domestic sales, up from 12% in 2022.
Government initiatives including tax incentives for machinery upgrades and export promotion programs provide support, though electricity costs remain a concern.
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