Indonesia’s Potential to Becoming the Top Player in ASEAN’s EV Market

Jakarta, 12 May 2023 – During the 42nd ASEAN Summit held in Labuan Bajo, East Nusa Tenggara, ASEAN demonstrated its determination to develop an ecosystem for electric vehicles (EV). Within ASEAN, some member states have already established their own EV industries, namely Thailand and Indonesia. In Indonesia alone, production reaches 1.2 million units per year, and capable of engaging in export and import activities within ASEAN markets. 

Fabby Tumiwa, Executive Director of Institute for Essential Services Reform (IESR) explained that there are several factors to consider to promote the growth of the EV ecosystem, one of which is the development of the EV component industries, particularly batteries which can account for up to 40% of overall EV prices. Furthermore, discussions on batteries also involve talking about critical mineral industries, such as lithium, nickel, manganese, and cobalt. Not every ASEAN member states possesses these critical minerals, which positions Indonesia, as a nickel and cobalt producer, with the potential to be a hub for battery industry development. 

“However, other countries like Thailand possess other strategic advantages such as a more supportive investment climate for electric vehicle development. Therefore, it is not surprising that China prefers to establish factories in Thailand rather than Indonesia,” Fabby explained.

In addition to batteries, Fabby sees Indonesia’s potential as an electric vehicle supplier, and steel. Alloys are also required for EV frames, which Indonesia can supply due to its ownership of several iron ore industries. Domestically, Indonesia’s automotive industry has employed a significant amount of labor, so it is hoped that when the time comes to move away from  fossil fuel vehicles, Indonesia will not be solely reliant on importing electric vehicles. Considering Indonesia’s market potential, Fabby believes that middle-range vehicles (priced around Rp 400-600 million) are the most suitable and promising for the Indonesian market. 

“Furthermore, Indonesia will likely participate in the EV global supply chain, given our strategic advantages such as abundant natural resources, developed vehicle industries, and intermediate industries such as battery cells,” pointed out Fabby.

Fabby also commented that the incentives needed lie in the research and development of a new-generation battery. He highlights that nickel reserves will last less than 20 years if they continue to be extensively mined for battery production, which also applies to lithium.

Moreover, Fabby explains that the most viable strategy is to research for a new generation of batteries using readily available metals in Indonesia. Incentives are also necessary for downstream industries to stimulate the EV market until 2030. With the increasing demand of EV, it is hoped that Indonesia will attract more investors, consequently strengthening the domestic supply chain.

“In the future, we hope to have a complete industrial chain, encompassing not only battery production, but also vehicle manufacturing. Therefore, stimulus measures to boost demand must also be implemented,” Fabby concluded. 

Photo by dcbel on Unsplash

Incentives to Boost Electric Vehicle Adoption

5 April 2023 – Electric vehicle subsidies have recently become an interesting topic on social media.  Some consider this policy as a mismatch, but others argue that electric vehicles will help the energy transition process.  In the Ruang Publik KBR event which was held online on March 20 2023, Ilham R.F.  Surya, IESR Environmental Policy Researcher, explained that giving electric vehicle incentives would be useful in stimulating electric vehicle adoption.  In addition, the government also needs to implement an Avoid-Shift-Improve (ASI) strategy to reduce emissions in the transportation sector.

According to Ilham, the use of the Avoid-Shift-Improve (ASI) paradigm will help reduce carbon emissions, especially for the transportation sector as one of the biggest emitters.

“If possible, avoid it first, such as reducing unnecessary trips.  If not, do the shift by using public transportation.  The final option is to improve or use environmentally friendly technology,” Ilham explained.

Furthermore, he explained that electric vehicles are set to meet the needs of environmentally friendly technologies.  In terms of emissions and pollutants, electric vehicles are much lower than fuel vehicles, even when the electricity source is not optimal or they still use coal.  According to him, using electric vehicles is a small act that can be done individually to reduce carbon emissions, apart from using energy wisely.  Moreover, the energy sector is now the largest contributor to emissions in Indonesia, which is around 26%.

Regarding Indonesia’s readiness to adopt electric vehicles, Ilham stated that all parties were still waiting for each other to show readiness before taking further steps in developing electric vehicles.  What will have the most impact, however, is the installation of Public Electric Vehicle Charging Stations (SPKLU) or charging units, which will be 3-4 times more effective in increasing electric vehicle adoption due to reduced range anxiety.  In addition, electric vehicles have so far provided several innovations in technology, and in terms of safety, they are also following vehicle standards in general.

One of the efforts to increase the adoption of electric vehicles by the government is to provide incentives because there is still a gap between the prices of electric vehicles and fuel vehicles.  Regarding the recipients of the incentives themselves, Ilham stated that the purchasing power of Indonesian people is still limited to electric motorcycle consumers, while electric cars are more affordable for 1% of the population.  So, to increase adoption, incentives are better suited to be given to electric motorbike consumers.

“Before this incentive was implemented, it would be nice if the requirements for the Domestic Component Level (TKDN) were mandatory for incentives, because, by increasing adoption, it would simultaneously employ domestic workers,” Ilham explained.

Ilham also assessed that electric vehicles can help with accessibility in remote areas.  However, the challenge that arises is electricity which often experiences rotating blackouts in the regions.  Another challenge to electric vehicle adoption includes the price, not only the price of the vehicle but also the infrastructure.  Apart from that, there is also range anxiety because the infrastructure is inadequate.

In the future, Ilham believes that as technology improves, the price of electric vehicles will decrease.  The amount of decline per year is around 9%, so by 2030, it is expected to be equivalent to the price of a gasoline car.  In addition, with the increasing adoption of electric vehicles, it is expected that Indonesia’s dependence on fuel, which until now has been subsidized, will decrease.  By reducing emissions and pollution, coupled with reducing fuel consumption, of course the energy transition will develop more rapidly.

“But of course, the decision to buy an electric vehicle still depends on the buyer.  Look at the needs and supporting infrastructure, and don’t depend on the fear of missing out (FOMO).  For now, of course, give incentives to those who need it more,” Ilham concluded.

Projections of electric vehicles in 2023 are summarized in the Indonesia Electric Vehicle Outlook 2023.

Electric Vehicles to Support Decarbonization of Transport

Jakarta, 28 March 2023 – The energy transition process requires great efforts from all sectors, including the transportation sector. Transport decarbonization then becomes a practical and affordable way for individuals to cut carbon emissions. One way to do this is by using an electric vehicle. In an interview with Saya Pilih Bumi at IIMS last February 24, Faris Adnan, Researcher for Electricity Systems and Distributed Energy Resources at IESR, explained the progress of the decarbonization of transportation that is currently happening in Indonesia.

“From year to year, the development of electric vehicles in Indonesia continues to increase. In 2022 alone, the increase in the adoption of electric motorbikes can reach 5 times and electric cars 3 times compared to the previous year,” explained Faris.

Geographically, 70-80% of electric vehicles in Indonesia are still concentrated in Jakarta. In terms of the economic ability of buyers, most of the users are also in the upper middle class. This demographic is following the economic capacity of each region, which considers that the price of electric vehicles is still competitive compared to fuel vehicles.

Faris said charging facilities tend to be built in areas with high electric vehicle users, creating a dilemma for local electric vehicle users and investors. Electric vehicle users are concentrated in Jakarta, so most of the Public Electric Vehicle Charging Stations (SPKLU) are built in Jakarta. Investors will be more reluctant to build in areas where there are no users, while users will also reconsider using electric vehicles due to range anxiety. Thus, government policies and investments are needed to stop these problems.

Regarding the performance of the electric vehicle itself, Faris thinks that the technology is not perfect. The system has limitations which, when removed, can make the range farther or the speed higher. However, doing so will wear the battery more easily. In addition, Faris assessed that if the vehicle’s power is low, its speed will also decrease, in contrast to fuel vehicles.

Every year, fuel consumption increases by around 1.2 million kiloliters, which contributes to a significant increase in carbon emissions. Faris then explained that the comparison of emissions between electric vehicles and fuel depends on their use. Currently, the majority of Indonesia still uses coal as an energy generator, so the use of electric vehicles has not yet become zero emission. But with the same use, the emissions emitted from electric vehicles are certainly lower. If electric vehicles are sourced from renewable energy, the emissions released will be minimal compared to if the electricity is sourced from coal-fired power plants.

“Electric vehicles are important for pursuing decarbonization, but they are not the only solution. If we talk about decarbonization, it is important to use the Avoid-Shift-Improve (ASI) framework. The existence of this electric vehicle can also help to let go of our dependence on fossil fuel, and even better if it is integrated into public transportation,” concluded Faris.