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. 

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