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12 IESR Recommendations for Accelerating of Electric Vehicle Ecosystem Development in Indonesia

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Tuesday, 23 February 2021-Indonesia needs to work harder to prevent the increase in the earth’s temperature below 2℃ by reducing the addition of greenhouse gas (GHG) emissions in the world, including by boosting the penetration of renewable energy and environmentally-friendly transportation.

The transportation sector contributes about a quarter of total global GHG emissions. The amount of this emission will increase along with the development of a country’s economy. In 2019, the transportation sector was the second-largest contributor to Indonesia’s greenhouse gas (GHG) emissions (157 million tonnes CO2 or 27%) after the industrial sector (215 million tonnes CO2 or 37%). Many countries in the world, including China, the United States, and countries in Europe are increasingly adopting electric vehicles which are proven to have lower emissions and better efficiency in the use of electric energy than conventional vehicles.

By online, the Institute for Essential Services Reform (IESR) launched a study on Developing an Electric Vehicle Ecosystem in Indonesia: Lessons learned from the United States, Norway, and China, which contains prominent strategic and policy recommendations for the government for the advancement of the electric vehicle ecosystem in Indonesia. 

“Nowadays, there are 17 countries that have not allowed the sale of fossil fuel-based vehicles from 2025-2040, one of which is Norway, which will ban internal combustion engine vehicles by 2025,” said Fabby Tumiwa, Executive Director of IESR.

Electric vehicles are seen as one of the solutions to reduce GHG emissions from the transportation sector. The development of electric vehicles in a decade has also grown rapidly. Fabby added that globally, electric cars have experienced a rapid increase in the last decade, from 0.1 market share in 2011 to 4.4% in 2020.

“Although in general, vehicle sales have decreased by 15 percent due to the Covid-19 pandemic, the demand for electric vehicles has increased in several countries. Compared to 2019, China increased 5 percent, Europe increased 10 percent, the United States increased 4 percent, “he explained.

Quoting data from the IEA, Fabby emphasized that for the earth’s temperature to be maintained according to the Paris agreement, the adoption of electric vehicles must be 13.4% of the total vehicles from 2030.

Indonesia Has Not Developed a Planned Electric Vehicle Ecosystem

Idoan Marciano, Author of the Study on Developing Electric Vehicle Ecosystems in Indonesia: Lessons from the Experience of the United States, Norway, and China, explains the reasons IESR chose these three countries as best practices that Indonesia can emulate. The countries that registered the highest electric vehicle adoption (2019) were China (3.4 million units) and the United States (1.5 million units), while the country with the largest electric vehicle market share in the world was Norway (greater than 50 percent).

IESR believes that the electric vehicle ecosystem in Indonesia has not been well developed. The ecosystem referred to in this study includes several aspects, namely: (a) incentives and supporting policies from the government, (b) charging infrastructure; (c) the model and supply of electric vehicles; (d) public awareness and acceptance; (e) the supply chain for batteries and electric vehicle components.

The Indonesian government, through the Ministry of Industry, is targeting the number of electric vehicles to reach 20% of total vehicle production in 2025 (400,000 Low Carbon Emission Vehicles (LCEV) and 1,760,000 electric two-wheeled vehicles). However, until August 2020, there were only 2,279 roadworthy electric vehicles.

“For electric motorbikes, 1,947 units do not reflect the number of adoptions after Indonesia launched an accelerated development program for electric vehicles because this figure still describes low-performance electric vehicles, which already existed from the previous year,” added Idoan.

To meet the target, IESR encourages the Indonesian government to implement fiscal policies, which will make electric vehicle prices more competitive. Reflecting on the experiences of the three countries, incentives can be in the form of VAT exemptions, registration taxes, import duties, and subsidies. Meanwhile, currently, the total incentives provided by the Indonesian government are only able to reduce about 40 percent of the initial price of electric vehicles entering Indonesia.

No less important is the provision of non-fiscal incentives by user needs, such as the ease of obtaining a number plate (registration) which is considered to greatly increase the attractiveness of electric vehicles in China, providing access to high occupancy vehicles in several states in America. States, and granting bus line access in Norway.

“Currently, Indonesia does not have any restrictions on the use of fossil-fueled vehicles, compared to comparison countries that have targeted 100 percent EV in the next 5-20 years,” said Idoan.

Besides, from the supply side, the government also needs to increase the quantity and availability of various models of electric vehicles by providing policies that encourage producers to produce more electric vehicles, such as by setting fuel efficiency standards at an early stage and using the electric vehicle credit mechanism when the market is already on as applied in China and California.

In supporting the creation of the domestic electric vehicle industry, the government can learn from China by providing special incentives for local manufacturers and using public procurement as a tool to boost production volumes for locally made electric vehicles, thereby accelerating economies of scale.

The construction and expansion of the charging infrastructure (SPKLU and SPBKLU) networks, as well as the preparation of home charging infrastructure, are needed to support the adoption of electric vehicles. The ratio of electric vehicles to the SPKLU in 2019 was the most massive in China, namely a ratio of 6.5: 1. The ratio represents countries with a more mature level of electric vehicle development. Meanwhile, if Indonesia follows the road map issued by PLN, it will only reach around 70: 1.

This study recommends several strategies and policies that can be adopted by the government and all stakeholders to develop the electric vehicle ecosystem in Indonesia, as follows:

  1. Align the national electric vehicle adoption targets and make them binding
  2. Develop an integrated roadmap for the transition to electric vehicles
  3. Implement policies to limit the sales of fossil fuel vehicles 
  4. Provide financial incentives (from the central government) to reduce the purchase price of electric vehicles, a minimum of about 50 percent for electric cars, for electric motorbikes only 5-10 percent more expensive than the price of conventional motorbikes.
  5. Provide fiscal and non-fiscal incentives (from local governments) under the conditions of their respective regions 
  6. Impose technology transfer in collaboration with the international electric vehicle and battery manufacturers
  7. Issue supply-side policies, like fuel economy standard, conventional vehicles quota and to encourage production and increase the availability of electric vehicle models 
  8. Provide grants to research and academic institutions, as well as to EV and battery manufacturers to support R&D of electric vehicles and batteries technologies 
  9. Increase investment in domestic industrial and supply chain development of electric vehicles 
  10. Develop a more massive public charging infrastructure network through a mandate from government entities along with the subsidies for private developers 
  11. Electrify public transportation as an entry point for the adoption of the electric vehicle. IESR appreciates the ongoing collaboration.
  12. Promote electric vehicles as environmentally friendly vehicles and educate consumers on the benefits and incentives of purchasing EVs

The study report Developing an Electric Vehicle Ecosystem in Indonesia: Lessons learned from the United States, Norway, and China can be downloaded at:

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