Indonesia soon to be a major EV player - with government help

Indonesia is rapidly positioning itself as a hub for electric vehicle (EV) development and deployment, potentially becoming a key player in the global EV supply chain. In addition to growing demand, supportive regulation and favorable local market conditions are helping to super-charge EV production capabilities.

Interest in EVs has been growing significantly in recent years in Indonesia. That is according to new research from consulting firm Redseer Strategy Consultants, that shows sales of hybrid vehicles more than tripled in 2023, with battery EV sales increasing by more than four times.

What’s more, the research shows an uptick in search queries from Indonesians that want to know more about EVs. From 2021 to January of this year, internet searches on the topic more than doubled, signaling a growing interest.

Incentives for domestic production

The regulatory landscape in Indonesia has been increasingly amenable to EV production, which could be worth up to $182 billion by 2030, according to Redseer Strategy Consultants. That is thanks to, at least in part, a lot of incentivizing from the Indonesian government.

For example, the deadline on a rule regulating the percentage of local components in EVs manufactured in Indonesia has been delayed, allotting more time to automobile manufacturers.

Beyond that, an existing luxury tax on EVs was removed for 2024 and an import duty was also temporarily removed. And an incentive for local buyers: The VAT charged on EVs was lowered dramatically, from 11% to just 1%. This all illustrates the concerted effort from Indonesian authorities to encourage EV production in the country and to attract more investment.

Indeed, the Indonesian Ministry of Investment and Maritime Affairs has specifically noted these incentives are part of an effort to build an EV industry in their country, which they hope will bring a local battery industry along with it.

EV batteries

Besides EVs, Indonesia is eyeing EV batteries as an attractive opportunity. The thought process in Jakarta is that, benefiting from the country’s natural supply of raw materials like nickel, cobalt, lithium, and manganese, bringing the EV industry in will allow building a strong battery sector.

Looking forward to the green future of mobility, Indonesia’s government has already announced that they hope for their country to become the world’s largest producer of EV batteries.

Indonesia’s nickel reserves are thought to make up around 25% of the entire world’s global reserves. After disappointing revenue for raw nickel exports, Indonesia President Joko Widodo implemented an export ban, shoring up the material for domestic production, increasing its value.

In addition to the huge stores of raw materials, Indonesia can also look forward to becoming a leader in the EV battery recycling industry, another area of great potential. The circular economy for battery materials has become big business in recent years as lithium reserves dwindle and demand is higher than ever.