The race for electric car dominance in Indonesia has started with more and more car manufacturers launching their Battery Electric Vehicles (BEV) in the first half of 2022.
This is due to the country鈥檚 prospective position as a manufacturing hub for electric vehicles, what with its abundance of nickel 鈥� an estimated one quarter of world鈥檚 reserves and an integral component of car batteries 鈥� as well as the government鈥檚 aggressive pursuit towards the creation of a viable electric vehicle industry ecosystem.
This ecosystem has at least charmed two BEV producers. The first is South Korea-based Hyundai which has begun assembling its widely popular Ioniq 5 model in Indonesia. The car is expected to hit Indonesian retailers in the middle of this year. The second is China-based Wuling Motors, which recently announced the launch of its best-selling BEV for the Indonesian market: the Wuling Mini EV.
For additional context, as much as 1,700 units of the Hyundai Ioniq 5 had been ordered as of Monday, May 9, 2022, since it was launched in April of the same year. This is already nearly 90% of the sales of all electric car types, namely Hybrid Electric Vehicle (HEV), Plug-in Hybrid Electric Vehicle (PHEV) and BEV, in the first half of 2021.
South Korea and China have been particularly aggressive in developing their electric vehicle manufacturing capacities in Indonesia, with South Korean-based LG Chem Ltd. already starting the construction of its electric vehicle battery component in Batang Industrial Estate in Central Java this month. The LG factory is part of a US$9 billion vertically integrated manufacturing project that includes everything from nickel smelting to assembling finished products. Meanwhile, China-based Contemporary Amperex Technology Co. Limited (CATL) aims to start the construction of its factory this year as part of a $6 billion investment in a similar but separate project.
Hyundai and Wuling鈥檚 efforts to be at the forefront of the Indonesian electric vehicle market have not gone unnoticed. The Japanese carmakers who have traditionally dominated the Indonesian car market are finally waking up to the competition. Though none of the big five carmakers (Toyota, Daihatsu, Honda, Mitsubishi and Suzuki) have announced details, some at least have acknowledged the demand for a mass-marketable BEV in Indonesia. The strategy for Toyota, the market leader, has been to stick to HEVs and PHEVs while continuing to monitor the market. As for European carmakers, Mercedes-Benz, the market leader for luxury cars in Indonesia, announced it was bringing its all-electric EQS sedans into the country this year.
鈥淭his year, we will be launching the All-New EQS Mercedes-Benz, and we are very excited to open a new chapter in Indonesia after 51 years of being in the market,鈥� said Choi Duk Jun, President Director of PT Mercedes-Benz Distribution Indonesia, as quoted by Liputan6.
Untapped Potential
While there is undoubtedly high demand for EVs in Indonesia, there remains the challenge of an underdeveloped infrastructure. There are only 267 electric charging stations and only 266 battery exchange stations across the whole country as of the end of 2021. In other words, the government has failed to reach its target of 527 electric charging stations and 3,000 battery exchange stations by the end of 2021 as stated in the Battery-Based Electric Vehicle roadmap issued in the same year.
This further exacerbates the already difficult challenge of electric vehicle prices, which are currently still around twice as much as the widely available traditional internal combustion engine vehicles (though it should be noted that the Wuling Mini EV is challenging this fact).
Nevertheless, the government remains committed to developing an ecosystem for the country鈥檚 electric vehicle industry. As widely reported in local and international publications, President Joko Widodo himself met with Elon Musk at the SpaceX launch site in Boca Chica, Texas, recently, to discuss potential investment and technology. It was a follow up to a 2021 visit by Tesla to Indonesia regarding potential battery-related investments. Tesla鈥檚 possible entry into the Indonesian market would further drive competition and innovation for battery technology in Indonesia. More recently, another American carmaker, Ford Motors, also expressed interest to invest in Indonesia and develop the country鈥檚 BEV industry.
On the regulatory side at least, the government has introduced a number of benefits for both electric vehicle producers and consumers. This March, the Ministry of Finance introduced a 0% import tariff policy for incompletely knocked down electric vehicles. Meanwhile, consumers of electric vehicles have also been exempted from the odd-even traffic system implemented in some of the country鈥檚 more congested major cities, such as the capital city of Jakarta and the city of Bandung in West Java.
That the race for electric vehicle dominance in Indonesia has begun is already apparent. Fortunately, the race is just only beginning and there are plenty of opportunities for European companies to engage in the nascent Indonesian electric vehicle industry. In this regard, the presence of a local partner will be highly beneficial for those looking to tap into Indonesia鈥檚 massive market potential.