How Indonesia plans to increase electric vehicle uptake and become a regional manufacturing hub
By Sourced Externally
January 17, 2024
Ever since she was a child, Nully aspired to reduce her carbon footprint by catching public transport to school instead of getting a lift from her parents.
Years later, that environmental consciousness also partly drove her decision to buy an electric vehicle.
“I didn’t want to be someone contributing to transportation emissions,” said Nully, who lives in Jakarta where congestion is choking the city.
Nully also worked out that, over time, owning an EV would be cheaper than a petrol-engine vehicle.
“My considerations were both mathematical and a desire for something efficient,” she explained.
Still, Nully is among just 1 per cent of people driving an EV on Indonesian roads.
But the government of South-East Asia’s largest auto market is determined to boost domestic EV use, with a raft of incentives designed to bring prices down.
Initiatives to boost EV uptake
The Indonesian government has used tax incentives to increaseelectric car sales, including removing a luxury sales tax and lowering value-added tax — the equivalent of GST in Australia — from 11 to 1 per cent.
“So it makes the price more attractive,” said Francisco Podesa, South-East Asia regional lead for the International Council on Clean Transportation (ICCT).
The government also offers a 7 million Indonesian rupiah ($700) subsidy for each electric motorcycle sale.
State-owned electricity company Perusahaan Listrik Negara (PLN) provides discounts for EV owners charging their vehicles at home overnight.
“If we charge between 10pm and 5am, there’s a 30 per cent discount,” Nully said.
EV drivers in Jakarta are also issued special number plates, which mean they are exempt from road usage restrictions that apply to petrol-engine vehicles.
The city has an “odd-even” policy, meaning cars with a licence plate ending in an odd number are only allowed on certain roads on odd-numbered dates.
Cars with an even number at the end of a licence plate can only travel on those roads on even-numbered days.
“I’ve found this to be a significant advantage for my daily mobility,” Nully added.
While these incentives are designed to boost domestic EV use in Indonesia, they are part of a broader government plan for the country to become a global EV and battery manufacturing hub.
Indonesia’s EV manufacturing ambitions
When ABC Indonesia visited a motorcycle and scooter manufacturing plant on the outskirts of Jakarta, the factory floor was a hive of activity with lines of workers assembling EVs.
Selis’s two-wheel EVs are extremely popular in Jakarta partly because of the government subsidy, explained Imam Subari, the company’s marketing manager.
Locally-made EVs must include domestically sourced elements, Mr Subari said, adding that the nickel in the battery of their EVs was the main domestic component.
Nickel is a key ingredient in lithium-ion batteries used in some EVs.
In November 2023, Indonesia and Australia signed an agreement to “advance mutually beneficial cooperation” on battery manufacturing and critical minerals processing, as the South-East Asia nation looks to reduce its reliance on China.
China is a world leader in EV manufacturing and uptake rates, according to the International Energy Agency.
Indonesia has ambitious plans to produce some 600,000 EVs by 2030 — more than 100 times the number sold in Indonesia in the first half of 2023.
To entice car manufacturers, the government offers a raft of incentives including tax holidays for foreign investors.
China’s Wuling and South Korea’s Hyundai, which both produce EV cars in Indonesia, currently account for the lion’s share of EV sales, while billions of dollars of investments have been flagged by other car makers for EV plants in the country.
South-East Asia’s ‘EV revolution’
Thailand is also striving to be a leading EV manufacturing hub in the region.
The country is the largest car producer in South-East Asia, and the Thai government aims to convert about 30 per cent of its annual production of 2.5 million vehicles into EVs by 2030.
The Thai government has also been using incentives to increase EV uptake in the country — and it has come with much success.
Thailand accounts for half of all EV sales in South-East Asia, according to global market research firm Counterpoint.
Buyers can access a subsidy of up to 100,000 Thai baht ($4,260) per EV car, although this rebate is less than the previous subsidy package, valued at up to 150,000 ($6,380) Thai baht.
In Vietnam, Vietnamese conglomerate VinFast is leading the country’s “EV revolution”, Professor Podesa said.
But domestic uptake of EVs has mostly been in the two- and three-wheeler markets, which have also grown significantly, he added.
“Ten per cent of two-wheeler sales are electric, which is a very, very significant number, given that Vietnam is the third-largest motorcycle market after China and India.”
Most of these motorcycles are also made in Vietnam and the manufacturers are “newer, smaller companies” that use cheaper lead acid batteries, Professor Podesa said.
Despite the push to increase EV uptake in South-East Asia, Professor Hussein Dia, head of Future Urban Mobility at Swinburne University of Technology, explained overall usage rates remain low.
About 6 per cent of people in South-East Asia switched to EVs by the second quarter of 2023, Dr Dia said.
“In comparison, Australia managed to reach an uptake rate of 8.1 per cent in 2023, which is better than in previous years but still lags behind the world average of around 14 per cent,” he said.
EVs remain a “luxury item” for lower-income earners in South-East Asia, Dr Dia added, and “beyond reach” for many Australians.
Most countries in South-East Asia as well as Australia “still lack good networks” of EV charging stations, he said.
“That’s probably because they have been lagging in their EV transition journeys compared to China.”
Back in Jakarta, Nully acknowledges there are still challenges for EV drivers but expects issues like charging infrastructure to improve.
“In the future, I hope it will be easier for us, the pioneer electric vehicle buyers,” she said.