INDONESIA REPORT
In October 2025, LiuGong Indonesia, the Indonesian subsidiary of the Chinese construction machinery manufacturer LiuGong, signed a memorandum of understanding regarding its investment plan for an industrial zone. The new factory in Karawang, which is expected to begin operations in 2026, will have an annual production capacity of 5,000 units and will require a total investment of $317 million. The factory will incorporate AGVs, MES and a dedicated R&D center for electric construction machinery, advancing the adoption of advanced technologies.
Through partnerships with local suppliers, the company aims to increase its TKDN (local content requirement) and achieve certification within five years. Products will be exported to the domestic market, as well as to Southeast Asia, Australia and North America, with an expected annual foreign exchange earnings effect of $40 million. LiuGong views this investment as a contribution to strengthening Indonesia’s heavy equipment industry ecosystem and supporting sustainable development.
Source: LiuGong
PSR Analysis: This is a multi-purpose investment, primarily aimed at capturing domestic demand in Indonesia while also targeting the development of export hubs in Southeast Asia, Australia and North America, and TKDN compliance.
TKDN stands for Tingkat Komponen Dalam Negeri, which translates to Domestic Component Level in English. It is an Indonesian government policy and regulatory framework that measures the percentage of local (Indonesian) content used in goods or services.
TKDN represents the proportion of domestic materials, labor, and services used in production relative to the total production cost. Its primary goal is to strengthen local industries, reduce dependence on imports, and ensure that more economic value is generated within Indonesia.
In particular, TKDN compliance could become a priority condition for government procurement, suggesting an intent to increase the likelihood of selection for domestic public works projects. Given the expectation of continued stable growth in Indonesia’s construction machinery market, the environment is conducive to improving the economic viability of local production. These developments are also likely to increase the presence of Chinese manufacturers in Indonesia and other Southeast Asian countries. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
