On 5 August 2019, Indonesia’s President Joko Widodo signed presidential regulation (Perpres) on electric vehicles (EVs) to provide government support in order to promote the industry in the country. Indonesia is aiming to leverage its abundance of essential metals such as cobalt, manganese and other key materials used in EV batteries and bring down the cost of the batteries and the vehicles, which are currently around 40% more expensive than fossil fuel version.
Indonesia has also been directing efforts towards processing its nickel laterite ore, utilized in lithium batteries. In January 2019, construction started on a lithium battery project in Morowali, on the Indonesian island of Sulawesi, led by Chinese companies including battery firm GEM Co Ltd and units of lithium battery maker Contemporary Amperex Technology Ltd (CATL) and stainless steel-maker Tsingshan Holding Group.
The new Perpres outlines fiscal incentives such as import tariff incentives for battery-based EV, the supporting technology and materials, and value-added tax deductions. Indonesian government will allow for imports of completely built units (CBU) – entire vehicles – for three years under a quota system as companies prepare for the production of greener cars production. By 2023, all such cars must have a minimum local component mix of 35%. Car makers would also receive reductions in import tariffs for EV machinery and materials, while their buyers would face lower luxury taxes.
The new regulations would also assist in the development of hydrogen fuel cell vehicles. However, the government predicts that development of EV industry might take more than three years as electric cars are on average 40% more expensive than regular cars.
Indonesia aims to become an EV hub for Asia, with a target to begin EV production in 2022 and for the share of EV output to reach 20% of total car production by 2025. Principals who have expressed interest in investing in the EV industry in Indonesia include Toyota Motor Corp (USD 2 billion) and Hyundai Motors (USD 880 million).
(Sources: Jakarta Post; Business Times; Xinhua; Reuters)