Features
30 Jan 19

Indonesia: 20% EV by 2025

South-East Asia’s largest economy has announced its target to produce more electric vehicles; the goal is for 20% of all locally manufactured cars to be electric by 2025. Unsurprisingly, the focus on EVs is not a standalone initiative; the real strategy is all about the country’s natural resources.

Nickel Laterites

The island of Sulawesi is located roughly in the middle of Indonesia, shaped as a horseshoe in between the Java, Banda and Celebes Seas. It is unfortunately best known for its 2018 earthquake and tsunami. The island is rich in nickel laterite ore, an ingredient of the lithium ion batteries, used to power EVs. The Morowali site, where 20 nickel laterite processing facilities are located, is targeted to become the region’s largest lithium ion battery plant. Construction of the project is to be finalised before end of 2020.

Partnerships

Indonesia is now in talks with a number of unnamed Japanese, Korean and Chinese companies to partner up in the project. Although deputy industry minister Harjanto couldn’t comment on the identity of these companies, it is certain that Hyundai, that already invested USD 880 million in Indonesia to produce EVs, is part of the future partnership.

Mitsubishi as well has announced collaboration with the Indonesian government in an EV infrastructure research program.

Incentives

In order to attract manufacturers and investors, Indonesia has put in place a tax incentive for battery producers and EV manufacturers. In addition, Indonesia is ready to offer preferential tariff agreements with countries willing to source EVs from Indonesia.

Local tax incentives will be linked to emissions or, as the deputy industry minister put it: "The lower the electric vehicle's carbon emission, the lower the tax will be."

Feasibility

Not everyone is overly enthusiastic about Indonesia’s ambitions. The feasibility of the timelines is questioned: many large projects (infrastructure, airport, metro,…) weren’t finalised on time nor within budget. In addition, the even with natural resources present, nickel smelter technology is complicated and requires industry acumen that Indonesia hasn’t acquired yet.

Furthermore, Indonesia has no charging infrastructure today. The entire vehicle energy sector is operated by the government and is particularly conservative. It’s not very likely that the sector will make a 180 degree turn and install charging stations across the country within the next years.

Finally, even if Indonesia is the region’s second car manufacturing hub, in order to become successful, it will need to acquire a manufacturing maturity, similar to Thailand’s. The Thai have been building cars for decades and were extremely successful in transforming the industry from local production to export.

The Indonesians will have to step up if they want to turn their ambitions into reality, but overall it’s a good initiative to modernise its economy and make the country greener.

Image: traffic in Jakarta, Indonesia

Authored by: Yves Helven