Indonesia, the largest economy in Southeast Asia, has set an ambitious target to become a global hub for electric vehicle (EV) production and adoption. The country aims to have 2.5 million EVs on the road by 2025, and 20 percent of all car sales to be EVs by 2030. However, the country faces several challenges in achieving its EV vision, such as the high cost of EVs, the lack of charging infrastructure, and the need to balance domestic and foreign interests.
Indonesia has a strong potential to become a leader in the EV industry, thanks to its abundant natural resources and large domestic market. The country has the world’s largest nickel reserves, which are essential for making lithium-ion batteries for EVs. It also has significant deposits of copper, bauxite, and tin, which are also used in battery production. Indonesia plans to leverage its nickel resources to develop a comprehensive EV battery ecosystem, from mining to refining to manufacturing.
Indonesia also has a huge demand for mobility, especially for two-wheelers and public transport. The country has more than 100 million motorcycles, which account for 80 percent of the total vehicles. Motorcycles are also a major source of air pollution and greenhouse gas emissions, as they consume 40 percent of the total energy in the transport sector. By electrifying motorcycles and buses, Indonesia can reduce its dependence on oil imports, lower its carbon footprint, and improve its urban air quality.
Indonesia’s EV Policies
To realize its EV potential, Indonesia has enacted several policies and incentives to support the development and adoption of EVs. In 2019, the government issued Presidential Decree No. 55, which provides a roadmap and guidance for the country’s EV strategy. The decree covers various aspects of EVs, such as technical standards, fiscal incentives, non-fiscal incentives, local content requirements, and infrastructure development.
Some of the incentives offered by the government include tax exemptions or reductions for EV manufacturers and consumers, preferential tariffs for EV imports, subsidies for EV charging, and mandatory use of EVs by state-owned enterprises. The government also requires a minimum local content of 35 percent for EVs by 2023, and up to 80 percent by 2030, to promote domestic value addition and competitiveness.
Indonesia’s EV Challenges
Despite its EV potential and policies, Indonesia still faces several challenges in achieving its EV goals. One of the main challenges is the high cost of EVs, which makes them unaffordable for most consumers. EVs are currently priced at least twice as much as conventional vehicles, due to the high cost of batteries, components, and import duties. The government’s tax incentives are not enough to bridge the price gap, and the consumer awareness and preference for EVs are still low.
Another challenge is the lack of charging infrastructure, which limits the range and convenience of EVs. Indonesia currently has only about 300 charging stations, mostly in Jakarta and other major cities. The government plans to build 2,400 charging stations by 2025, but this is still far from meeting the projected demand of 2.5 million EVs. Moreover, the country’s electricity grid is not ready to support the large-scale deployment of EVs, as it suffers from frequent blackouts and low renewable energy penetration.
A third challenge is the need to balance the interests of domestic and foreign stakeholders, especially in the EV battery sector. Indonesia wants to attract foreign investment and technology transfer from global EV players, such as Tesla, BYD, and Hyundai, but it also wants to protect and promote its own state-owned enterprises, such as Pertamina, PLN, and INALUM. The government’s local content requirements and nickel export ban may deter some foreign investors, who may prefer to source their batteries from other countries, such as China, South Korea, or Japan.
Indonesia’s EV Outlook
Indonesia has a clear vision and ambition to become a global EV hub, but it also has a long way to go to overcome its challenges. The country needs to address the issues of cost, infrastructure, and stakeholder alignment, to create a conducive and competitive environment for EV development and adoption. Indonesia also needs to align its EV policies with its broader climate and energy goals, to ensure that its EV transition is sustainable and inclusive. If Indonesia can successfully achieve its EV targets, it will not only benefit its own economy and environment, but also contribute to the global EV revolution.
