There is basically nothing that can stop the fourth most populous nation in the globe from making the decision to establish itself as the electric vehicles (EV) capital of the world. In fact, there are multiple reasons why automakers and tech firms are choosing Indonesia as their preferred destination for EV investments.
Especially after a senior minister stated on Wednesday, that Indonesia may set aside 5 trillion rupiahs ($320.41 million) from the budget for next year to encourage the purchase of electric vehicles (EVs). However, the specifics of the program are still being worked out.
Discounts on domestically produced EVs
In addition to other incentives for hybrid vehicles and electric motorcycles, Industry Minister Agus Gumiwang Kartasasmita stated last week that purchasers might receive a discount of 80 million rupiahs for EVs produced by companies with factories in the nation. The government intends to defray the costs by providing merchants with subsidies.
During a news conference on Wednesday, Indonesia’s chief economics minister, Airlangga Hartarto stated that officials are outlining how much they may offer per transaction depending on the budgetary allotment.
The government may also subsidize the sale of electric buses, he claimed.
Officials hope EV industry growth
At the same press conference, President Joko Widodo said that the country believes that with these incentives, the electric motorbike and electric car industry would develop.
According to Airlangga, Indonesia intends for EV sales to make up 20% of all auto sales by 2025.
Toyota Motor Corp, Mitsubishi Motors Corp, and Hyundai Motor Co. are among the companies that have made investments in Indonesian EV manufacturing or have made plans to do so.
A plant for assembling electric vehicles is located in Southeast Asia under the name SGMW Motor Indonesia, a joint venture between SAIC Motor Corp Ltd, General Motors Co, and Wuling Motors Holdings.
In an effort to attract investment and production of both EV batteries and automobiles, Indonesia has also courted the American company Tesla.
Japanese EV producers’ dominance
Toyota is the market leader in the fourth-most populous country in the world, where Japanese brands now dominate sales. The country sold more than 942,000 automobiles between January and November of this year. Toyota, a Japanese automaker, has plans to invest 27.1 trillion rupiahs ($1.8 billion), or over five years, in the republic to create electric vehicles.
Nikkei Asia reported that a senior Indonesian minister asked Japan to engage in infrastructure projects and the electric vehicle industry, pointing out that Japan is well positioned for post-pandemic economic growth.
As a result, the Japanese automaker Mitsubishi Motors Corp. has plans to invest roughly US$666.89 million, or 10 billion rupiahs, in Indonesia over the next three years. According to Reuters, the Japanese corporation planned to increase its output in the Southeast Asian nation and had invested 11.3 trillion rupiahs through 2021.
According to reports, Mitsubishi also intends to manufacture hybrid and battery-powered automobiles in the nation. They are not the only Japanese company making investments in Indonesia, though.
Mitsubishi Motors CEO Takao Kato said the business intended to manufacture hybrid and battery EVs in Indonesia.
Why Indonesia is an EV “kingdom”?
As of 2020, 15.79 million passenger vehicles were on the streets in Indonesia. The majority of which were gas-powered. The Indonesian government has pledged, as part of its Golden Indonesia 2045 Program, to reduce its carbon emissions by 41% by 2030 as a response to high carbon emission output and other issues.
In addition, Indonesia is the source of some of the most vital minerals in EV battery manufacturing uses. This comprises bauxite, copper, nickel ore, and nickel. The anticipated life of the nickel deposits is more than 30 years.
Last but not least, Indonesia’s labor expenses are lower than those of other nations. Despite the seeming low labor costs in China and India as well, it appears that firms will ultimately earn more from the Indonesian labor market.
There is therefore no reason why EV carmakers and even battery makers would not want to invest in the country given all of its advantages. Indonesia may have had a sluggish start to its digitalization journey, but based on the surge in investments, the nation is unquestionably on the right track to becoming the EV “kingdom”.