Indonesia lays groundwork to spur domestic electric vehicle industry

To achieve the ambitious targets broader energy sector policy reforms are needed.

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Indonesia is eyeing the development of a domestic electric vehicle industry, with a Presidential Decree on Electric Vehicles (EV) being presented to the public in mid August.

This was followed up by the Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan who said at an event on Wednesday that the government currently encourages investments into the electric vehicle industry, including lithium battery manufacturing and charging station infrastructure development. Indonesia has been planning to make use of its mineral resources to become a key hub in the Lithium battery supply chain.

Speaking at the Indonesia Electric Vehicle Exhibition, Panjaitan revealed that several car and battery component makers, including Chinese battery maker Contemporary Amperex Technology Co Ltd (CATL),  South Korean battery maker LG Chem Ltd, Japanese battery maker Panasonic Corporation and Europe automakers Mercedes have expressed interested to participate in the investment of a lithium battery manufacturing and recycling facility, valued at USD 4 billion in Morowali, Central Sulawesi.

He added that domestic players should get involved in making Indonesia an EV hub for Asia and beyond with a target to start EV production in 2022.

“We [the government] agreed to push this [the electric vehicle industry]. I ask all investors in this field, do not ever hesitate, the government will help,” Luhut announced. He also promised “tax breakthroughs” to devised by the Ministry of Finance shortly, which would make Indonesia “more competitive.”

Meanwhile, auto makers and distributors said they are still waiting to see how industry guidelines derived from the recent presidential decree and their implementation will play out.

“Toyota has various electrification technologies,” said Rouli Sijabat, a spokesman for PT Toyota Astra Motor, Indonesia’s sole distributor for Toyota at the event. “Surely we are waiting for the implementation instructions and the technical regulation, so we can achieve market acceptance as expected.”

Indonesia’s largest taxi operator Blue Bird, who has introduced some EV into its fleet, said that the buying cost for an electric vehicle was expensive, and that the lack of charging stations is one main issues holding back the expansion of an e e-taxi fleet.

“We are happy there is a legal umbrella now [for the EV industry],” Adrianto Djokosoetono, the director of  Blue Bird Group told KrAsia in an interview.

Ikhsan Asaad, the general manager of Indonesia’ state owned electricity company (PLN) told KrASIA at the event that it will prepare five fast-charging stations in Jakarta by the end of this year, to support the infrastructure and encourage people to use EVs. PLN also offers a participating scheme for private firms, with a target to install 52 fast charging stations in some cities in Indonesia until 2020.

The government effort to kickstart an EV industry in Indonesia still needs to prove it can gain momentum with consumers, as well as prove that it contributes to the ultimate goal of lowering emissions. Some analysts have a cautious outlook.

“Transitioning away from petrol is certainly a worthy aim,” Kevin O’Rourke, a writer at Reformasi Weekly, a report analyzing politics and policymaking in the country, told KrASIA. But, he points out, at present the alternative to petrol is electricity generated from very low-calorie coal. Therefore environmentally the plan would actually exacerbate smog as well as CO2 emissions,” he said. “LNG might be a better alternative in terms of smog, but that would require higher pricing for both electricity and bigger disincentives for petrol use.” Petrol has traditionally been cheap in Indonesia, due to government subsidies.

For the EV goal to be workable, broader energy sector reform is needed, O’Rourke said. This would require more investment in geothermal, solar, wind and other clean renewables.