Reasons Two Automotive Component Giants Relocate to Vietnam

Bosue.id - Unpleasant news comes from the national automotive industry sector, which potentially faces a massive wave of layoffs. Two giant automotive component companies operating in East Java Province are reportedly planning to move a large portion of their production processes to the neighboring country, Vietnam.

Relocation Plan for Japanese Automotive Component Companies

This surprising information was first revealed by the Special Advisor to the President for Labor and Worker Welfare, who is also the President of the Confederation of Indonesian Workers' Unions (KSPI), Said Iqbal. According to Said Iqbal, the principal (parent) companies headquartered in Japan intend to diversify their products and change their business direction. The two factories, with the initials PT J and PT S, are located in the industrial areas of Pasuruan and Mojokerto, East Java.

This relocation plan is driven by the parent companies' desire to focus more on the production and development of electric vehicles (EVs). Based on initial information obtained by labor unions, the companies assess that the current climate for electric car development is far more promising and productive to undertake in Vietnam compared to Indonesia. The Vietnamese government is considered more proactive as it is implementing various progressive policies that strongly support the development of electric car factories in their country.

Impact of Layoffs and a Warning Bell for Industrial Competitiveness

This relocation decision undoubtedly brings very serious socio-economic impacts for domestic workers. If this plan to move operations is fully realized, it is estimated that thousands of employees from the two factories in Pasuruan and Mojokerto will become victims of mass layoffs.

Responding to this phenomenon, the Secretary General of the Indonesian Automotive Component Manufacturers Association (GIAMM), Rachmad Basuki, stated that the plan for these two companies to leave should serve as a strong warning bell regarding the competitiveness of our national automotive industry. As global-scale companies, PT J and PT S certainly would not make relocation decisions carelessly. They are assured to have conducted thorough research and business calculations before choosing Vietnam as their new production base. Basuki emphasized that this relocation decision indicates that foreign investors see more incentives and long-term benefits if they operate in Vietnam rather than maintaining their factories in Indonesia.