Jakarta, IO – Indonesia’s electric vehicle (EV) ecosystem is starting to take shape. The country currently has a production capacity for 1.6 million units per year. However, as of this writing total production is only 100,000 units. “This suggests that there is still a huge opportunity,” President Joko “Jokowi” Widodo was quoted as commenting, by Detikcom.
By accelerating a battery-based electric vehicle (KBLBB) program, the government hopes to enhance energy efficiency, bolster energy security and further energy conservation in a transportation sector powered by clean energy – which can improve air quality and reduce greenhouse gas emissions along the way. This is part of Indonesia’s efforts to achieve carbon neutrality and combat climate change. In addition, it will elevate Indonesia’s industrial prowess, technology and design in this fast-growing sector, turning the country into a major EV production hub and export base.
To facilitate the implementation and acceleration of the program, one key area of focus is a structure of explicit regulations that can provide clear direction, guidance and legal certainty.
Since 2019, the government has encouraged the use of KBLBB, by providing various incentives, reducing production costs, and accelerating the development of charging infrastructure. For two-wheeled EV, the target is to have 31,000 public electric vehicle charging stations (SPKLU), 67,000 public EV battery exchange stations (SPBKLU), and a 30 percent market share by 2030, which translates to 13.5 million electric scooters and bicycles on the road.
Thus far, the government has enacted several regulations to support EV development in Indonesia. These include Presidential Regulation (Perpres) 55/2019 on the acceleration of a KBLBB program for road transportation, Government Regulation (PP) 73/2019 which imposes higher luxury tax (PPnBM) rates on cars with higher engine capacities and greater tailpipe CO2 emissions (in effect since 2021), Transportation Ministerial Regulation (Permenhub) 45/2020, which regulates specifications and usage of e-scooters, Permenhub 65/2020 on the motorcycle conversion program from internal combustion engine into electric powertrains, and the follow-up Permenhub 15/2022 which extends the scope of the conversion to motor vehicles other than motorcycles, Energy and Mineral Resources Ministerial Regulation 13/2020 on the provision of electric charging infrastructure for KBLBB, Home Ministerial Regulation 8/2020 on the formula for the calculation of motor vehicle tax and ownership transfer stamp duty, Industry Ministerial Regulation ( Permenperin) 27/2020 which stipulates the minimum domestically-manufactured content of EVs sold in Indonesia, Permenperin 28/2020 which requires assembly for Completely Knock-Down (CKD) and Incomplete Knock-Down (IKD) vehicles to take place in Indonesia.
Indonesia is committed to tackle climate change by cutting carbon emissions to net-zero by 2060, and the EV transition is a key plank of this ambitious plan. However, it also provides Indonesia a golden opportunity to escape the middle-income trap and make a great leap forward into becoming a developed country. The government’s roadmap to achieve this goal is to build a vertically-integrated EV ecosystem, starting with batteries, as stipulated in Perpres 55/2019. The end goal is to make Indonesia an EV global powerhouse and a key node in the global value chain, similar to Taiwan’s outsized role in semiconductor manufacturing (the island produces an estimated 80 to 90 percent of the world’s highest-end chips).
Capturing the opportunity
Indonesia lays claim to the world’s largest nickel reserves, estimated to be around 21 billion tons, equivalent to 30 percent of global reserves. The country is also rich in other key EV battery components – tin (world’s second-largest reserves), bauxite (6th), and copper (7th). With all these assets, Indonesia is well placed to make use of the opportunities presented by the global shift to EV. It is public knowledge that battery assembly accounts for 60 percent of an EV price, while 60 percent of the cost is attributed to minerals. This is why Indonesia is adamant in its downstream processing drive.
Indonesia is a huge market for motorbikes and scooters. It has the third-highest motorbike use in the world. The government itself has set a target to increase the population of e-bikes to 13.5 million by 2030, as can be seen in the chart above.
(FIGURE 1 & 2. Indonesia’s growth target for electric motorcycles)