With sustainability and ESG gaining strategic importance across countries and industries, we are witnessing a surge in the adoption of EV (electric vehicle) technology across economies. As one of the largest economies in south-east Asia, Indonesia is gearing up to become a global EV leader. While currently, China and the US are dominating the EV market, Indonesia is increasingly coming up as the new hub for EV investments and cost-efficient development, due to multiple favorable circumstances. Invariably, EV technology investments and development are being seen as the major forces driving Indonesia’s post-pandemic growth, towards a strong economy. This article will focus on the driving factors for Indonesia’s EV rise, potential investments and opportunities along with the goals the country seeks to achieve.
Operations LeaderStrategINK Singapore
What’s driving EV growth in Indonesia?
There are several factors driving EV growth in Indonesia. While EV is becoming a national priority for all countries, there are other favorable factors which are adding value for Indonesia to facilitate the EV ecosystem and investments, including:
- Easy access to materials: Indonesia houses some of the world’s largest nickel and copper reserves, which are needed to make lithium-ion batteries for EVs, making the country a sought after EV investment destination.
- Fiscal incentives: Indonesia is also offering several fiscal and regulatory incentives to attract EV investments including, tax allowances, holidays and tariff cuts for imported machinery and materials.
- Consumer demand: 70% of citizens in the country have shown an affinity or interest towards owning an electric vehicle, with cheap electricity being a major driver.
Thus, greater adoption of EV, driven by high level of investments and EV development will enable Indonesia to strengthen its fiscal position, reduce dependence on oil imports and help the country make a headway on its low carbon emission goals, leading to overall environmental, economic and social development for the country.
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Indonesia’s EV goals
Based on its growth drivers, Indonesia has set some ambitious EV goals focusing on capturing a large market share, exponentially growing production and marching towards net zero emissions.
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EV investments driving EV growth in Indonesia
With easy access to material, fiscal incentives and a growing demand base, Indonesia is rising as a leading EV investment base for car manufacturers and makers from across the globe. While some concrete investments are already in place, other soft commitments are also on the map, illustrating Indonesia’s growth as a global EV leader. Some of the top investments include
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National EV targets and practices for Indonesia
Indonesia’s focus on EV has been in the making for almost half a decade now, where since 2017, several targets have been pledged on EV adoption. The targets have also been accompanied by policies/ policy ideas to support the EV transition. Some of the top targets set by different agendas include
Over the years, several recommendations have come to the forefront to help Indonesia reach its set targets and goals to become an EV technology leader. Some of the top recommendations include:
- Develop regulatory and fiscal policies and guidelines to promote EV technology demand and supply
- Develop technical guidelines for fiscal policies
- Formulate more favorable electricity tariffs for EV users
- Conduct research for technology options for domestic manufacturing and service capacity
- Strengthen charging infrastructure by conducting technical assessments of charging options
- Support development of implementation guidelines for electricity tariff
- Facilitate charging infrastructure development plan at local level
- Increase consumer awareness to support EV uptake via outreach campaigns, knowledge sharing platforms, etc.
- Accelerate EV deployment in public and private fleets with procurement guidelines, operational environment, etc.
- Establish pilot projects in cities and replicate success cases to other cities and develop EV guidebooks
- Enhance reward and recognition for leadership in promoting EVs and peer learning among cities
Opportunities and next steps for EV in Indonesia
Undoubtedly, the potential and scale for EV adoption in Indonesia is phenomenal. Many fiscal regulations and presence of resources have made the country an investment hub. However, like any other new technology adoption, some initial interventions can help facilitate seamless scaling. Some of the key opportunities to address the challenges include:
- Creation of a taxation system that reduces the purchase price of EVs addressing the high cost obstacle
- Prioritize support for Research and Development and conduct technology assessment to further product availability
- Support from both national and local governments as well as incentives to develop charging stations and other infrastructure and supply chain
- Improve public outreach regarding incentives and benefits of EVs in order to incentivize purchase of an EV and increase awareness
Indonesia is uniquely positioned to become a global EV leader in the coming years. The revenue of EV Charging Equipment market grew at a CAGR of 499% during 2017 to 2021, indicating the pace of growth and opportunities. With investments flourishing in, Indonesia is all set to ensure EV growth at scale.
For more updates on the EV development in Indonesia and other ASEAN countries, stay tuned to this space.