How Indonesia Can Lead the Electric Vehicle Drive in Asia?

As the largest auto market in Southeast Asia, Indonesia is making tremendous leaps towards electric vehicles

The automotive industry is undergoing significant transformations. As the industry is among the producers of carbon emissions, the EU has set a standard of 95 grams of CO2 emissions per kilometer traveled on average. These regulations significantly come ahead of the anticipated prohibition of ICV sales in Germany, the UK, and Sweden in 2030, and France and Spain in 2040. Japan, China, Canada, and California also come under this prohibition by 2035. Like other countries, Indonesia encourages low emissions e-mobility technology through its Low Carbon Emission scheme.

As the largest car production market in Southeast Asia after Thailand, Indonesia has announced a plan to ban sales of petrol and diesel cars by 2040. In August 2019, President Joko Widodo signed a regulation to promote battery-powered road vehicles in the country. They aim to establish an electric vehicle hub in the region through tax incentives with local content rules.

Looking at sales of EVs in the Asia Pacific, battery electric vehicles’ sales in the region have surged dramatically since 2010. China accounted for the largest share of EVs in use as of 2018 and was predicted to continue to produce the most EVs in the region by 2022. According to the data from Statista, there are 4.8 million electric vehicles in use globally


State of Electric Vehicles in Indonesia

Few countries have demonstrated quite an outstanding growth in the electric vehicle ecosystem. Like Norway, Sweden, the U.S., and China, among other countries are leading the EV market worldwide, Indonesia has also pledged to electrify its transport system. Through its EV policy announced in 2019, Indonesia plans to offer incentives for manufacturers, transport companies, and consumers ramping up the production of electric vehicles. The incentives include reduced import tariffs for EV manufacturers on unassembled and semi-assembled vehicles over a specific time period. It also incentivizes import tariff deductions for machinery and materials used in EV production.

When it comes to sales volume, Indonesia is a key contributor in the ASEAN region. Now as the country has just begun entering the field of the electric powertrain, it saw 24 electric passenger vehicles sold in 2019, compared to just 1 unit sold in 2018. The University of Indonesia research shows that over 70 percent of the people in the country are keen to have an electric vehicle.

A public transport service company owned by the city government, TransJakarta aims to have an entirely electric-powered bus fleet in less than seven years. Since the company relies on subsidies from the Jakarta government, it is gradually turning to renewable energy.

Indonesia, Thailand, and Malaysia are the three largest auto markets in Southeast Asia. These countries are keen to lead the global EV market. However, as the COVID-19 epidemic caused economic turmoil, the region’s economies are in deep recession. This has also reduced the demand and sales of vehicles.

Apart from this, some of the significant barriers are the high cost of EVs in Indonesia, changing consumers’ behaviors, building the necessary infrastructure for the growth of the EV market. 

Despite these concerns, robust government initiatives in this sector are creating confidence among investors. For instance, Toyota will invest US$2 billion to develop its EV capabilities in Indonesia between 2019 and 2023. The company plans to create an EV Smart Mobility project as part of supporting the use of EVs in the eco-tourism ecosystem in Nusa Dua, Bali. In the pre-COVID-19 world, the Indonesian government announced an ambitious target to boost EV production by 20 percent throughout 2025.