EKONID Insight

Indonesia takes another step forward in adopting electric cars

16/07/2020

The Indonesian government has issued new regulations on concerning motorized electric vehicles (EV), pushing the country a little closer to adopting EV as a mainstream mode of transportation.

On June 16, 2020, the Indonesian Ministry of Transportation issued Transportation Minister Regulation No. 45 of 2020 (PermenhubNo. 45/2020) on the Physical Type Testing of Electric-Powered Motorized Vehicles. The regulation lays out all the requirements an electric vehicle must have before it can be sold in Indonesia, including additional testing that does not exist for conventional vehicles such as electric recharging capabilities, insulation, functional safety and hydrogen emission. 

The issuance of this regulation is a major development for carmakers overseas and domestic as they race to capture Indonesia’s market of 265 million people. Every year, more than one million cars are produced in Indonesia, plus nearly 300,000 commercial vehicles. Japanese manufacturers, which has had a long-standing grip on the majority of the Indonesian car market, are expanding their Indonesian export hub. In 2018, they exported 350,000 automobiles (in whole or in part) all over the world, as quoted by GTAI. Most recently, this export prospect has led South Korean car manufacturer Hyundai, to soon start manufacturing in Indonesia. 

The Indonesian government, keen on reducing fossil fuel subsidies and reduce CO2 emissions, have been pushing for a faster adoption of electric cars. Last year, President Joko Widodo already issued Presidential Regulation No. 55/2019 on the Acceleration of Battery-Powered Electric Vehicle Program for Land Transportation. Signed into law on August 8, 2019, the regulation lays out the various initiatives the government will take to develop the electric vehicle industry, including the requirement to have component made locally, the incentives available for car makers that produces electric vehicles, and the handling of electric waste from the EV industry.

That is not to say that Indonesia will start seeing electric vehicles rolling down its cities’ streets anytime soon. Regulators must still tackle questions such as the tariff for electricity at EV charging stations and technical requirements for battery waste recycling, among other EV related infrastructure. Additionally, the World Bank, in its Global Economic Risk and Implication for Indonesia report published in September last year, cast doubt as to whether Indonesia can truly jumpstart its EV industry, citing a lack of engineers, restriction on foreign capital and non-tariff trade measures as hurdles.

Presidential Regulation No. 55/2020 targets 2,200 units of EV, 711,000 units of hybrids, and 2.1 million units of electric motorcycles by 2025. In this regard, small movements in the electric vehicle scene has made their appearances. The government’s research and development body BPPT launched two fast-charging stations in Jakarta and Serpong, South Tangerang, at the end of 2018, and continues to look for other possible projects in developing the country’s capacity in adopting EV. Ride hailing company Grab launched its first fleet of electric vehicles in early 2020, with pilot service of 50 EV cars started at the Soekarno-Hatta International Airport. Meanwhile, Mitsubishi’s Outlander plug-in hybrid electric vehicle model launched in 2019 has stolen a lead in the sector with 83.3% of the total EV sales in 2019, according to US-based consultancy firm Frost and Sullivan. German carmaker BMW has already pledged its readiness to tackle Mitsubishi’s lead with its own model of complete electric-powered cars.