IEVO 2023: Building Indonesia’s Electric Vehicle Ecosystem

Jakarta, 21 February 2023 – Decarbonization of the transportation sector is a crucial strategy in climate change mitigation to prevent the earth’s temperature from rising beyond 1.5 degrees Celsius. In Indonesia, besides the use of biofuels, vehicle electrification can cut 23% of greenhouse gas (GHG) emissions from the transportation sector.

The Institute for Essential Services Reform (IESR) views the development of an electric vehicle ecosystem as an absolute to increase public interest in adopting electric vehicles, accelerate infrastructure distribution and develop the domestic electric vehicle industry.

The IESR in the 2023 Indonesia Electric Vehicle Outlook (IEVO) report notes that dependence on imported fuel has triggered inflation at the end of 2022 due to increasing subsidized fuel prices. Fuel consumption increased by an average of 1.2 million kiloliters per year between 2015 and 2020.

“The increase of fuel imports has eroded foreign exchange, weakened the exchange rate and forced the government to adjust fuel prices, which has an impact on inflation. As fuel price adjustments are politically unpopular and have an impact on people’s purchasing power, the government usually makes this a last alternative to cover the difference between the selling price and the cost of procuring fuel. Subsidies provided by the government deteriorate the fiscal capacity of the state budget. These could have been avoided if fuel imports were cut drastically by increasing the use of electric vehicles and substituting Internal Combustion Engine (ICE) vehicles,” said IESR Executive Director, Fabby Tumiwa.

Compared to ICE vehicles, electric vehicles are better at reducing emissions and having lower operating costs. IESR analysis shows that electric vehicles emit 7% less GHG emissions, and their operating cost per km is 14% lower than ICE vehicles. However, due to the limited availability of electric vehicle models, minimal infrastructure, and high initial investment, people are reluctant to switch to electric vehicles. 

“The government needs to look at the supply aspect of the Battery-Based Electric Motorized Vehicle industry and not just the demand. The tax deduction incentive for electric cars and IDR7 million for electric motorbikes is suitable. However, the eligibility of any car/motorcycle brand as the recipient of the incentives must be considered. The provision of this incentive must be linked to the development of the Local Content Requirements (LCR). Only brands with certain LCR may receive this incentive,” said Ilham R F Surya, Environmental Policy Researcher, IESR, who is also one of the authors of IEVO 2023

Furthermore, Ilham also said that electric two-wheelers (E2W) vehicle conversion could be an alternative to electrification at a lower price. Moreover, E2W is also a means of rejuvenating older motorbikes.

The government’s efforts to meet the GHG emission reduction target in the Nationally Determined Contribution (NDC) through a total of 15 million electric vehicles in 2030 can be seen from the availability of fiscal and non-fiscal policies. However, its fiscal policy is still focused on the demand side. Opportunities for the adoption of massive logistics ride-hailing drivers are expected to trigger the development of the electric vehicle industry in Indonesia.

“Currently, the electric vehicle industry from upstream to midstream has not been fully integrated. Some midstream projects, such as the production of new batteries, will run for at least 2025/2026. The government’s focus should be directed to accelerating the progress of the midstream project and convincing investors to carry out the many investment commitments that have been made,” said Pintoko Aji, co-author of IEVO 2023 and Renewable Energy Researcher, IESR.

For electric vehicle infrastructure, IESR assesses that although the installation has increased by 200% compared to 2021, the locations for Electric Vehicle Charging Station have not been spread evenly. 88% of Electric Vehicle Charging stations are still concentrated in Jakarta and Bali. Furthermore, the utilization of the Battery Swapping Station is still not standardized and only applies to certain brands.

“The government needs to facilitate Electric Vehicle Charging Station investment, one of which is changing the obligation to install three different types of ports in each Electric Vehicle Charging Station unit listed in MEMR Regulation No. 13/2020. The obligation to have three ports causes investment costs to swell to Rp 750 million-1.5 billion per Electric Vehicle Charging Station. Even though not all locations require three types of ports at once. If there is no such obligation, then with the same investment value, the number of Electric Vehicle Charging Stations built can be 3-4 times more,” Ilham added.

Ilham added that standardization of Battery Swapping Stations can be started from an electric motor with a battery capacity of 1.2 kWh or 1.44 kWh which is currently 79% of electric motors on the market, so it is not too difficult for manufacturing. Furthermore, the government also needs to standardize the shape and size of the battery to the electrical configuration in it.

Regarding the electrification of maritime and aviation transportation, Pintoko explained that the use of batteries in ships and aircraft has a challenge in the energy density of batteries, which makes them bigger and heavier, thereby reducing the cargo space of ships and aircraft payloads. This makes the electrification of maritime and aviation practical for a small scale with short distances.

IEVO 2023 recommends that the government strengthen upstream and midstream industry policies and regulations to reduce the price of electric vehicles, make rules to anticipate battery waste, increase interest from financial institutions for financing electric vehicles, and promote the use of electric vehicles.

IEVO 2023: Electrification of Transportation to Reduce GHG Emissions

February 19, 2023 – The Institute for Essential Services Reform (IESR) launched Indonesia Electric Vehicles Outlook 2023 for the first time. This report discusses the status of the development of electric vehicles for passengers and the supporting ecosystem for developing electric cars in Indonesia. IESR views that climate change mitigation with a significant reduction in emissions from the transportation sector can be carried out in a participatory way by the community to adopt electric vehicles.

The transportation sector is a source of pollution and contributes to greenhouse gas (GHG) emissions. There are 600 MtCO2-eq of Indonesia’s GHG emissions in the energy sector in 2021; 23% come from the transportation sector. Land transportation is the most significant contributor to GHG emissions in the transportation sector, with more than 90%. Emissions from the transportation sector are predicted to increase by 53% in 2030 compared to 2015 and almost double between 2030 and 2060. Decarbonization of the transportation system by accelerating the adoption of environmentally friendly and low-emission electric vehicles could be one solution, along with the transition to renewable energy in the power sector

“The government has included the use of electric vehicles as one of the mitigation action plans in the Nationally Determined Contribution (NDC). However, the target set still needs to be aligned with the Paris Agreement to limit the increase in the earth’s temperature below 1.5 degrees Celsius by 2050. According to the IESR study, to achieve zero emission by 2050, the number of electric two-wheelers and four-wheelers vehicles must reach 110 million units by 2030,” said Fabby Tumiwa, Executive Director of IESR.

To achieve the target, Indonesia should accelerate the adoption of electric vehicles by supporting fiscal and non-fiscal policies. Since 2019, the government has been intensively pushing for industrial development and the use of electric cars. However, at the same time, several pro-fossil energy policies are still implemented, making adopting electric vehicles less than optimal. For example, government policies continue to subsidize fuel oil (BBM) and extend fuel sales to Euro II standards. These policies have reduced the attractiveness of consumers to acquire electric vehicles and reduced the benefits of switching to electric cars in the form of reduced fuel cost savings.

“Dependence on fossil fuels in our energy system, especially the transportation sector, makes our energy sector vulnerable to price fluctuations. The government is trying to reduce dependence on fossil fuels in the transportation sector through battery-based electric motorized vehicles (KBLBB). However, it is still difficult to find electric charging infrastructure, expensive purchase prices, and limited performance and models are the main obstacles to consumer adoption of KBLBB. These various obstacles need to be resolved by the government,” explain Faris Adnan, IEVO writer who is also a researcher on Electricity Systems, IESR.

The IESR findings show that by 2022, the adoption of electric motorbikes increased five fold from 5,748 units in 2021 to 25,782 units. In addition, the adoption of electric cars has almost quadrupled from 2,012 units in 2021 to 7,679 units in 2022. The promotion of electric vehicles drove this increase through the G20 event, which made electric cars the official vehicle of the delegation.

“Even though there is an increase, the number is still far from the target set by the government. The population of new electric motorbikes is 0.2% of the total motorbikes in Indonesia. Meanwhile, new electric cars reached 0.4%. Therefore, for KBLBB to be more attractive and affordable to the public, several additional policy instruments that are right on target are needed,” said Faris.

One such policy instrument is a combination of incentives for producers and market creation to accelerate the economies of scale for electric vehicles, especially two-wheelers electric vehicles, which have significant market potential. For this reason, IESR recommends that the government encourage the implementation of the Presidential Instruction for the purchase of electric vehicles by government agencies and state-owned enterprises and encourage adoption by the ride-hailing business and logistics to accelerate the adoption of electric cars by the market in the next 2-3 years.

Furthermore, to get more significant GHG emission reduction and environmental benefits, an increase in the mix of new renewable energy generators in the electricity system is also needed so that the emissions produced by KBLBB are lower than those from internal combustion engines.

“The IESR study shows that it will obtain new emission benefits if the renewable energy mix in the PLN electricity system is above 20%,” continued Faris

IESR will launch and discuss the Indonesia Electric Vehicle Outlook (IEVO) 2023 on February 21, 2023, 09:30 – 12:00: 00 WIB online via Zoom Conference + Livestream Youtube (IESR). This event is an effort to encourage the acceleration of electric vehicles in Indonesia, bring together various relevant stakeholders, and accelerate Indonesia’s steps to make an energy transition. The event will be attended by the Chairperson of the Indonesian Transportation Society’s Environment and Energy Transportation Forum, Indira Darmoyono, Director of Business Development Strategy & Special Projects Grab Indonesia, Rivana Mezaya, and others.

Developing EV Ecosystem in Indonesia – A Report Study Launch

The use of electric vehicles as one of the emission reduction actions in the transportation sector is expected to replace fossil fuel-based vehicles. The electric vehicle which has higher efficiency, makes the energy consumption required far less in comparison to conventional vehicles, so they can produce much lower emissions. If supported by the use of renewable energy in the electricity system, electric vehicles have the potential to be an effective decarbonization solution in the transportation sector. On the other hand, the adoption of electric vehicles
can have a positive impact on the country’s economy, especially through a reduction in fuel oil (BBM) consumption and opportunities to develop the local electric vehicle industry.

Globally in 2019, there were 7.2 million units of electric cars and around 350 million units of two / three-wheeled electric vehicles, the majority of which were in China, the United States, and countries in Europe. These countries have successfully adopted electric vehicles by implementing strategies and certain policies that build the electric vehicle ecosystem. Writing this study aims to provide strategic and policy recommendations for the Indonesian government to be able to build an electric vehicle ecosystem in the country from the lessons of three comparison countries, namely Norway, China, and the United States. The three countries were selected due to their high level of electric vehicle adoption, and considering several other factors. China and America

The union has successfully recorded the highest sales of electric vehicles, while Norway has the largest share of the electric vehicle market in the world.

This study defines the electric vehicle ecosystem including several aspects, namely: (a) charging infrastructure; (b) electric vehicle model and supply; (c) public awareness and acceptance; (d) the supply chain for batteries and electric vehicle components; (e) incentives and supporting policies from the government. In this study, the strategies and policies adopted by the three comparison countries are analyzed for each aspect of the electric vehicle ecosystem.

The development of the electric vehicle ecosystem needs to be accelerated. Fiscal incentives for electric two-wheelers and restrictions on conventional vehicles are key to successful EV development in Indonesia

Despite the Ministry of Industry targets to increase annual electric vehicles (EV) sales to 400,000 units (passenger cars) and 1,760,000 units (motorcycles) by 2025, the current EV adoption rate is still low, writes Idoan Marciano, one of the authors of the Indonesia Energy Transition Outlook (IETO) 2021. By 2020, electric cars only reached 0.15% (229 units) of the 150,000 units sales/production target while electric two-wheelers at 0.26% (1,947 units) of the 750,000 units sales/production target. Looking at this trend, “it would be very challenging to hit the targets”, says Idoan. 

In order to achieve the targets, it is important to build the electric vehicle ecosystem, which consists of five aspects: (a) charging infrastructure; (b) electric vehicle model availability and supply; (c) public awareness and acceptance; (d) supply chain for batteries and electric vehicle components; as well as (e) supporting policies (including incentives) from the government.

In 2020, derivative regulations of the Presidential Regulation 55/2019 were issued at both the national and municipal levels to provide fiscal incentives and support for charging infrastructure development. This is in line with what the author emphasizes in the report that to increase demand for EV, fiscal -as well as non-fiscal- incentives such as exemptions of VAT, income tax, and import duty or subsidies will be critical. Furthermore, financial incentives such as direct subsidies for developers of public charging stations (SPKLU) and public battery exchange stations (SPBKLU) are also needed to expand charging infrastructure networks in the country.

“Charging infrastructure development is paramount to overcome range anxiety issues. To date, the number of both SPKLU and SPBKLU is still limited, far from the targets. It is also worth noting that the current SPKLU target set on the roadmap will only give a 1:70 ratio (meaning 1 charger to serve 70 EV), much higher than what IEA recommends at 1:10 ratio (or lower when a country is still in its early stages of EV adoption). Responding to this, “the government should aim for a ratio lower than 1:25, emulating what has been applied in high-EV penetration countries such as China, the United States, and Norway”, says Idoan.  

In addition, the author also underlines that the development of the local supply chain is necessary to ensure a self-sustaining EV development. Specifically, local production of lithium-ion batteries -the main component of EV- will be vital to help lower production costs of EV in Indonesia. Currently, the country has been building several production facilities for raw materials extraction and refinement of lithium-ion battery precursors. These facilities are scheduled to start their operations in the next 1-3 years. However, slow progress has been made in the battery cells and packs segments with local companies (including MIND ID, PT Aneka Tambang, PLN, and Pertamina) are still planning the development.

 Production facilities of raw materials extraction and refining process to produce batteries

Located in the Morowali Industrial Area (IMIP)Located in Weda Bay Industrial Area (IWIP)
CompaniesPT. QMB New Energy Materials
A JV between China (GEM Co, Ltd. and Brunp Recycling Technology Co.,Ltd., Tsingshan, Indonesia (PT IMIP), and Japan (Hanwa)
PT. Huayue Nickel Cobalt
A JV between five Chine companies
ProductionNickel and cobalt compounds
Annual Production Capacity
150 kilotons nickel sulphate, 20 kilotons cobalt sulphate, 30 kilotons manganese sulphate, and 50 kiloton nickel hydroxide

60 kilotons nickel and 7.8 kilotons cobalt

240 kilotons of nickel sulphate and 30 kilotons of cobalt sulphate
Total InvestmentArround USD 1 billionArround USD 1.2 billionAround USD 1 billion

Meanwhile, despite the issue of a used battery shortage, the establishment of a local battery recycling facility should be appreciated. “The facility is expected to help bring about cost-efficient EV production while mitigating the environmental impacts that EV development may cause.” 


The author further stresses the importance of local EV production, considering that “currently, all electric cars in the Indonesian market are imported as no local automakers have started EV production.” Recent commitments made by some of the global automakers to investing in EV production in Indonesia, however, bring the hope of establishing the EV industry in the country.  

By contrast, at least there are 15 companies with a total production capacity of 877,000 units producing electric two-wheelers. However, demand for electric bikes is currently too low to match the supply. “The government, therefore, needs to provide necessary incentives to increase demand”, notes Idoan. 

Domestic electric vehicles manufacturers

Four Wheelers (or more)Two or Three Wheelers
Local Producer1 company15 companies
BrandMAB (e-bus)
Viar, Gesit, Selis, MIGO, United,
Tomara, ECGO, Volta, Unifly, Electro, Sunrace, Artas, Gelis, Benelli, Keeway, Kymco
Production Capacity1,200 unit/year877,000 unit/year


The report also underscores the importance of raising public awareness of EV, its advantages, available incentives, and other useful information such as charging locations to help increase demand for such a new technology. “Demonstration and promotion projects need to be increased through cooperation and partnerships between the government, automakers, transportation companies, and charging infrastructure developers”, says Idoan. 

Finally, outlooking the EV development from 2021 onwards, the report proposes three actionable recommendations for the government. First, “the government needs to prioritize the development of electric two-wheelers as their adoption will be relatively easy due to price compatibility with conventional two-wheeled vehicles.” Additional fiscal incentives or direct subsidies to consumers, and other operational incentives are then necessary to help lower the total cost of ownership.

Second, “to see a significant increase in EV adoption in the country, the government should start restricting the use of conventional cars and motorcycles in major cities”. Lastly, “seeing the growing appetite from international investors, the government needs to ensure technology transfer will take in place through tight collaborations with foreign automakers. At the same time, the government should facilitate cooperation between domestic EV manufacturers and R&D institutions for the commercialization of domestically-made electric vehicles”, he concludes. 


Read the full report:

Author: Idoan Marciano (IESR Energy and Electric Vehicles Technologies Specialist) 

Editor: Pamela Simamora