Electric Vehicles (EVs) remain the ultimate global goal to ensure a more eco-friendly future in the automotive sector. The EV industry in Indonesia is growing and doing so strategically, in line with the country's strategic national decisions to ensure a sustainable future and stimulate the economy.
According to the Electric Vehicle Outlook (EVO): Supercharging Tomorrow's Mobility Report 2023 by AC Ventures and the Indonesian Electric Mobility Ecosystem Association (AEML), a key player in the country's EV industry, is boosted by its abundant resources and strategic location in the Association of Southeast Asian Nations (ASEAN).
The global rise in EV adoption results from the mentality shift years ago from predominantly focusing on fossil fuels to considering alternative power sources. Revenues in the EV market worldwide will reach USD 623.3 billion in 2024, growing by 9.82% to reach USD 906.7 billion in 2028.
China remains the number one nation for EVs, producing different car brands in large numbers to meet international demand and registering almost 60% of new electric vehicle owners in 2023. Over the coming years, manufacturers will sell 11.78 million vehicles and find 2.20 million charging stations awaiting them.
These developments show that governments are now more engaged in promoting initiatives that reduce carbon emissions, build up the electric car industry, and galvanise the local economies. Top leadership support also empowers the battery-making sector, helping them innovate longer-lasting, efficient, and affordable EV batteries.
Against this backdrop, Indonesia's automotive industry is reducing its reliance on traditional internal combustion engine (ICE) vehicles to develop a robust EV ecosystem. As the EVO Report 2023 shows, the country needs the public and private sectors to commit to creating a holistic and sustainable car industry. This calls for decisive action on the threat posed by climate change, and substantial efforts to reduce carbon emissions, making everyone involved and responsible.
Indonesian government's policies and incentives aimed at promoting EV adoption
According to Statista Research, in conjunction with Rakuten Insight, there are several reasons for choosing an electric vehicle over a conventional one. EVs are more environmentally friendly, have subsidised prices, are more affordable to fuel in the long term, and are comfortable to drive. Of the respondents, 83% wanted an EV because it is better for the environment.
The Indonesian government has taken steps to encourage citizens to switch from ICE and embrace eco-friendly mobility options. These steps include:
Subsidies and tax benefits
Many EVs are currently only affordable because governments subsidise production costs to encourage manufacturers to build more vehicles. Last year, there was a 0% export duty and reduced value-added tax (VAT) to 1%.
Reuters reported last year that Indonesian President Joko Widodo was confident Tesla Inc would finalise a deal to invest in a production facility in his country. He had been offering the USA EV manufacturer incentives like tax breaks to encourage them to make a deal.
Furthermore, the government has been urging Tesla to build an EV battery plant in the country.
Foreign EV manufacturers
The Indonesian government has set up business-friendly policies that attract foreign companies and make it easier for them to establish themselves. For example, Hyundai Motor Company signed a Memorandum of Understanding (MoU) with the Indonesian leadership in 2022 to build and operate a local manufacturing plant (Hyundai Motor Manufacturing Indonesia) that will become Hyundai's manufacturing centre in ASEAN.
Wooing foreign EV investment
Indonesian leaders have been trying to convince EV companies like Tesla to establish themselves in the region. Tesla owner Elon Musk was struggling to find an eco-friendly nickel-mining solution. Ultimately, he made a USD 5 billion deal with the government to obtain the essential component for EVs.
Infrastructure development
Only sustainable infrastructure development can ensure the entire EV industry will survive. With Chinese carmakers like Wuling Motors accounting for 40% - 75% of electric car sales, building fast-charging stations and investing in upgrading the roads and telecommunications equipment is essential.
Primary challenges facing Indonesia's EV market
The ASEAN electric vehicle industry faces multiple challenges that are hampering its development. They include adoption and implementation costs, inadequate access to EV technology, funding issues, and regulatory hurdles. Moreover, customers tend to have range anxiety—the fear that the EV will not be able to reach its destination without needing a recharge and not being sure there is a nearby charging station.
More still needs to be done to develop fast-charging infrastructure and deploy it along highways to ensure everyone can engage in long-distance travel. Additionally, there are ethical considerations, such as the impact of mining nickel. Making these high-tech vehicles also generates a lot of electronic waste, which harms the environment.
Future of the EV industry in Indonesia
Electric vehicles are the future, and Indonesian leaders are pushing for the general acceptance of the technology. Current trends show that the EV industry in Indonesia is strong and continuing to grow. While EV adoption is low, the numbers will pick up as time passes, and the costs will decrease.
Many opportunities for advancement, research, and innovation remain, which bodes well for the nation's EV industry.
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