Indonesia steps up EV sector expansion

Indonesia’s National Development Planning Agency (Bappenas) this month recommended that the government phase out sales of new internal combustion engine (ICE) vehicles by 2040, as part of its broader strategy to achieve net zero emissions by 2060.

Such a policy would benefit not only the environment but also the economy of the country by reducing its dependence on imported fossil fuels and making greater use of its natural resources. The agency expects that more than half of the 96 billion liters of fossil fuel estimated to be consumed by the country’s transportation sector by 2030 will be imported. In the mid-1990s, Indonesia was still a net oil exporting country.

Under the 2015 Paris Agreement, the Indonesian government pledged to cut greenhouse gas emissions by 29% by 2030 alone, or by 41% with international aid. Bappenas suggested that by 2055, as many as 90% of vehicles in use must be zero-emission vehicles, powered by batteries or hydrogen fuel cells, if the country is to meet its long-term emissions targets.

The challenges are great as the country lags most major global economies in vehicle emissions. The government only introduced Euro IV standards earlier this year after many years of delays, while emissions-related incentives have also only recently been introduced.

Fewer than 400 battery-powered vehicles were sold in the country in the first five months of 2022, most of which came from Hyundai Motor Group. Other markets in Southeast Asia have a similar low penetration rate of zero-emission vehicles, mainly due to a lack of government subsidies, although EVs are generally exempt from sales tax across the region.

Over the past two years, the Indonesian government has been very active in establishing a regional manufacturing center for EVs, batteries and other components to make the most of the abundance of raw materials, such as nickel.

Last year, it established a new state-owned company called PT Industri Baterai Indonesia (IBI) to support international companies investing in the upstream processing of raw materials, such as smelting and component manufacturing. The country’s president, Joko Widodo (Jokowi), points out that companies are, however, free to pursue their own independent investment plans.

Indonesia aims to attract total investments of at least $15 billion in the coming years to achieve 140 gigawatt hours (GWh) of annual EV battery production capacity in the country. The investment also includes local nickel-rich ore mining operations and two new high-tech ore processing/smelting facilities.

Earlier this year, Hyundai became Indonesia’s first mainstream EV manufacturer when it began operating its new 150,000-unit-per-year assembly plant in Cikarang, about 40 km east of the country’s capital, Jakarta. In March, the factory began production of the Ioniq 5 from kits imported from South Korea.

The South Korean automaker said it plans to invest an additional $1.5 billion to later expand the plant’s capacity to 250,000 units per year, as part of increased pressure on electric vehicle production in the country. the country. It is also investing in an EV battery plant in the nearby Karawang industrial estate, in partnership with LG Energy Solution Ltd (LGES), which will start production in 2024. LGES separately announced in April that it plans to build a $9 billion integrated EV. battery supply chain in Indonesia, in partnership with its majority shareholder LG Chem and other companies.

Just weeks before that, China’s Contemporary Amperex Technology (CATL), the world’s largest manufacturer of EV batteries, announced plans to establish a $6 billion integrated supply chain for EV batteries in Indonesia. In March, a preliminary agreement was signed between CATL subsidiary Ningbo Contemporary Brunp Lygend, IBI and Indonesian state-owned gold and nickel mining company Aneka Tambang.

Jokowi confirmed this week that his administration initially approached Tesla about 18 months ago about investing in an EV factory and battery supply chain in the country. In May 2022, he personally visited Elon Musk at Spacex’s Texas headquarters on an official trip to the US, while in the same month a team from Tesla also visited Indonesia to assess investment opportunities. Jokowi confirmed this week that talks with Tesla are ongoing and that Elon Musk has been invited to attend the G20 summit in Bali in October, where a formal investment announcement can be made.

Earlier this month, Jokowi hosted German President Frank-Walter Steinmeier at the presidential palace in the West Javanese city of Bogor, where earlier this month he called on German industry to ramp up their investment in Indonesia, particularly in the EV supply chain and in tech industries such as semiconductors.

Toyota has so far failed to follow through on plans announced before the pandemic to invest some $2 billion in electric vehicle production in the country, although it does offer a battery-powered concept version of its popular Innova minivan. showed at the Indonesia International Motor Show in April. At last week’s annual general meeting (AGM), Toyota came under fire for its slow transition to EVs worldwide.

Japanese automakers, which dominate the auto industry in Southeast Asia, have been noticeably absent from the EV market in Indonesia (and the region) so far, selling only limited volumes of hybrid vehicles. They now risk losing the EV initiative to South Korean and even Chinese manufacturers, who are striving to claim early mover advantage.

Leave a Comment

Your email address will not be published.