Introduction: Flow state, the optimal experience resulting from the equilibrium between perceived challenge and skill level, has been extensively studied in various domains. However, its occurrence in industrial settings has remained relatively unexplored. Notably, the literature predominantly focuses on Flow within mentally demanding tasks, which differ significantly from industrial tasks. Consequently, our understanding of emotional and physiological responses to varying challenge levels, specifically in the context of industry-like tasks, remains limited.Methods: To bridge this gap, we investigate how facial emotion estimation (valence, arousal) and Heart Rate Variability (HRV) features vary with the perceived challenge levels during industrial assembly tasks. Our study involves an assembly scenario that simulates an industrial human-robot collaboration task with three distinct challenge levels. As part of our study, we collected video, electrocardiogram (ECG), and NASA-TLX questionnaire data from 37 participants.Results: Our results demonstrate a significant difference in mean arousal and heart rate between the low-challenge (Boredom) condition and the other conditions. We also found a noticeable trend-level difference in mean heart rate between the adaptive (Flow) and high-challenge (Anxiety) conditions. Similar differences were also observed in a few other temporal HRV features like Mean NN and Triangular index. Considering the characteristics of typical industrial assembly tasks, we aim to facilitate Flow by detecting and balancing the perceived challenge levels. Leveraging our analysis results, we developed an HRV-based machine learning model for discerning perceived challenge levels, distinguishing between low and higher-challenge conditions.Discussion: This work deepens our understanding of emotional and physiological responses to perceived challenge levels in industrial contexts and provides valuable insights for the design of adaptive work environments.