Pacific money | Economy | Southeast Asia
President Joko Widodo hopes to turn Indonesia into a leading manufacturer of batteries and electric vehicles.
Tesla Model S electric car at an exhibition in Zhengzhou city in China’s Henan province, November 4, 2018.
Indonesia has unveiled a subsidy program to boost domestic electric vehicle (EV) sales as part of its broader effort to accelerate the adoption of electric vehicles and attract investment from major auto and battery manufacturers.
Monday Policy Announcement, Senior Cabinet Minister Luhut Panjaitan and Industry Minister Agus Gumivang Kartasasmitha said this would cover sales of 200,000 electric motorcycles and 35,900 electric vehicles. It will also cover the conversion of 50,000 internal combustion engine motorcycles to electric propulsion.
The subsidy program, which will begin on March 20, is in addition to Indonesia’s efforts to develop domestic electric vehicle manufacturing capacity to tap the country’s rich reserves of nickel, a key component of lithium-ion batteries used in electric vehicles. President Joko Widodo has set himself the goal of bringing electric vehicles to perfection. 20 percent all vehicles by 2025. Luhut has previously stated that hopes for indonesia by 2027 to become “one of the top three countries in the world in the production of batteries for electric vehicles, as well as electric vehicles.”
The government has not announced the overall budget allocated to the program, but has said manufacturers and retailers will be paid 7 million rupees (about $460) for each new electric motorcycle sold and each converted to electric. To be eligible, a company must ensure that the motorcycle is locally made or that at least 40 percent of its components are domestically produced.
Luhut said the policy would make Indonesia more attractive to major electric vehicle manufacturers, and that it is currently “finalizing negotiations with two of the world’s major automakers,” Reuters reported. informed. “We hope that this new policy will make our positions much stronger than before,” he added. “If we don’t give (incentives), they won’t come to us.”
Although he did not name either company, recent reports suggest that both Chinese automaker BYD Group and US electric vehicle maker Tesla completion agreements to invest in domestic electric vehicle manufacturing enterprises in Indonesia. Tesla last August signed contracts worth about $5 billion to buy materials for its batteries from nickel processing companies in Indonesia.
South Korean firms LG and Hyundai construction started in battery and electric vehicle assembly plants in Indonesia, while German BASF and French mining company Eramet Set to invest $2.6 billion for a nickel recycling facility for use in electric vehicle batteries. First, Tesla’s announcement last week that build a new factory in Mexico raised the question of whether he had plans to invest in a similar facility in Asia.
Indonesia’s ambitious EV plans face a myriad of challenges, from the high price of EVs and a lack of charging infrastructure to international resistance to nickel export restrictions Indonesia has imposed to encourage foreign investment in nickel refining. As William Yuen Yi noted on these pages Last month, another tough challenge for the Indonesian government was to “balance its desire to promote Indonesian state-owned companies as well as attract foreign investment to make their electric vehicle dreams a reality.”
If successful, this subsidy program represents one step on a journey that is likely to be very long.