Electric strategy progressing in Indonesia
In a previous article about South-East Asia’s biggest economy’s ambitions to go electric, we already mentioned that the country, rich in nickel laterite ore, (one of the ingredients of the lithium ion batteries) has announced the construction of a large lithium ion battery plant on the island of Sulawesi. Gradually, Indonesia is releasing more elements of its electrification strategy.
The entire EV strategy is based both on the exploitation of natural resources and the Indonesia’s objective to save up to $56 billion – the cost of its dependence on import of crude oil. Not all elements of the EV strategy are known, but based on the available info, Indonesia is looking upstream (i.e. from natural resources to battery production to EV production) to feed a brand new industry. It is therefore not a surprise that Indonesia is reaching out to OEMs. This week, the officials announced that Volvo and Renault were proposed to produce EVs locally.
Local incentives and export strategy
The government is preparing a set of rules and incentives to promote EVs, such as lower luxury tax and progressively higher taxation on ICE, which are supposed to feed the industry from within the country. The country’s largest taxi company, Blue Bird, has already announced to add EVs to its fleet later in 2019.
Also, President Joko Widodo is not hiding his intention to reward foreign investments with tax incentives. Finally, Indonesia is looking to reignite its stagnating export revenues via a combination of free trade agreements (e.g. with Australia) and more attractive products to sell abroad.
Renault and Volvo
Renault’s Indonesian COO has already reacted to the announcement, saying that a feasibility study is necessary before committing to investments, whilst Geely-owned Volvo has not yet respond for comments. The choice of OEMs is, to say the least, interesting. Neither brand has any significant penetration in Indonesia: Renault has sold 273 cars only in 2018 and Volvo is not even in the sales statistics of the 1.15 million vehicles sold in the country.
It’s a well-known secret that Hyundai and Mitsubishi are also looking into Indonesia as a manufacturing location. Mitsubishi has sold 142,861 cars in 2018, Hyundai 1,417. Japanese and Korean investors are also funding the battery plant. The most popular brands are Toyota (352,161 units), followed by Daihatsu (202,738 units). Especially the locally produced Toyota Avanza and Innova, both MPVs and a successful export product, are popular.
Fuel in Indonesia has been subsidised for a long time. Only recently (2017), the government has reviewed the subsidy structure, which has resulted in a significant price increase for the consumer. Pertamina, the state-owned fuel distributer, seems to be on board with the electrification strategy and has already committed to battery manufacturing.