Indonesian Electric Vehicles Industry Development Gains Momentum
The global automotive industry is steadily marching towards an Electric Vehicle (EV) revolution and Indonesia is no exception.
Globally, the development of EV marked a significant shift on the policy side of the Indonesian transportation sector. Bearing in mind the country’s nickel reserves, Indonesia is strategically positioned to become a major player in the global EV supply chain. However, Indonesia must invest in technology, talent resources, renewable energy and infrastructure to be part of the EV future of the region.
For context, the largest archipelago in the world owns about one-quarter of the world’s nickel reserves. Nickel is a key material in the production of batteries. As of 2020, total global nickel reserves were estimated to be around 94 million metric tons. Of that total, Indonesia has 21 million metric tons, followed by Australia with 20 million metric tons. According to Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan, in the next five to ten years, Indonesia needs up to US$35 billion in investment to build up its EV ecosystem and take a key position in the global EV supply chain.
In this regard, the Indonesian government has continually issued policies to speed up the development of its EV sector. On September 2020, the government officially annnounced its Electric Vehicle (EV) roadmap, which was published as part of Minister of Industry Regulation No. 27/2020, the roadmap lays out the country’s ambition to become a major player in the global EV market by 2030 with a planned local production capacity of more than 600 thousand units of four-wheeled EV and 2.45 million units of two-wheeled EV annually. Ever since, numerous policies have been issued to further boost the EV sector, such as the Ministry of Energy and Mineral Resources (MoEMR) issued MoEMR Regulation No. 13/2020, as well as the recently issued Positive Investment List (PIL). Under PIL, companies that participate in the development of Indonesia’s sector are eligible to benefits that ranges from ease of attaining business licenses to leveraging various tax incentives, such as 0% tariff on luxury vehicle tax for vehicles with zero emission technology as stipulated in Government Regulation No. 47/2021.
One company that looks set to be enjoying the benefit of PIL is South Korea-based LG which, at the end of 2020, has reportedly committed towards investing of $9.8 billion towards building an EV battery cell industry integrated with mining, smelting, refining, as well as the precursor and cathode industry. Another example of Indonesia’s seriousness in developing the EV sector is the agreement between four state-owned enterprises formed a holding company of the Indonesia Battery Corporation (IBC) in March 2021. IBC plays a strategic role in managing the BEV battery industry value-chain ecosystem from upstream to downstream. With an investment value of $17 billion until 2030, IBC aims to have battery production of around 140 Giga-Watt-hour (GWh) of which 50 GWh will be exported and 90 GWh will be used locally to produce Electric Vehicles.
The latest foray from IBC in developing the country’s EV sector is its plan to acquire German automotive manufacturer StreetScooter. The acquisition plan is aimed towards developing a business portfolio, the transfering of knowledge, as well as having strategic partners who have competence in EV development. Additionally, the acquisition is expected to open access for Indonesia to the Europe and American market, allowing Indonesia to become a player in the entire value-added EV supply chain.
The Indonesian EV Market Interest
According to Gaikindo's report on EV sales in Indonesia in 2019-2021, only 705 total sales were recorded in 2019, with hybrid sales recorded at 685 units and PHEV (Plug-in Hybrid Electric Vehicle) sales at 20. As of June 2021, the number of electric vehicle sales in Indonesia totaled 1,900 units. This total includes 1,378 (72.5%) hybrid models, 34 (1.8%) PHEV units, and 488 (25.7%) BEV units. When viewed from the total sales of cars in Indonesia in the first semester of 2021, the interest in the electric vehicle market is at 0.5% of total cars sold. These figures shows that the Indonesian EV sector is still in its infancy. However, it also shows that market interest has grown significantly. Considering the country’s rapid pace of urbanization and the significant share of youths in the country’s demographic, there is no question that interest in EV will only rise as the Indonesian society moves towards a more sustainable lifestyle.
The road is still long for the country in developing its EV ecosystem. For instance, only 219 units charging stations for EVs have been built in 185 locations across Indonesia by November 2021. In comparison, there are over 5,500 official conventional fuel station across the archipelago as of the end of 2020. However, considering the market potential offered by the fourth largest country in the world in terms of population, dismissing the EV sector in Indonesia would be a mistake. Already has Toyota Indonesia announced its plans to build a battery assembly plant for electric cars at the company's facilities located in Karawang, West Java, starting next year. This is in line with the company’s plans to start producing hybrid electric vehicles (HEVs) in the same period. Toyota’s plans is also in line with the prediction of Yannes Martinus Pasaribu, an automotive expert and academic at the Bandung Institute of Technology, who said that the race to capture the Indonesian EV market may start as early as 2022.