Indonesia is doubling down on its efforts to become an electric vehicle powerhouse just as the global demand for lithium batteries is predicted to jump to 777GWh, four times its current level. The country plans to focus on technology and foreign partnerships in order to grow its EV footprint.
Following in the footsteps of China, Singapore, and South Korea, Indonesia has set the ambitious target of phasing-out diesel vehicle sales by 2040. The country is even organizing an international event dedicated to electric vehicles at the end of March 2021. It has also pledged to increase its new and renewable energy mix to 23% by 2025. Achieving these goals is going to be a serious challenge as the country’s energy mix is largely dominated by coal.
From exporter to central player in the EV supply chain
Indonesia possesses abundant resources of lithium, nickel, and cobalt - all of which are indispensable materials for the manufacturing of EV batteries - and a well-developed extracting industry. However, the country is no longer satisfied with its role as raw materials exporter: Indonesia wants to impose itself as an indispensable player of the EV supply chain.
Yet, the country’s EV market is at an embryonic stage: in 2019, only 24 electric vehicles were sold in the country. The charging infrastructure is also starting to emerge, with only 62 stations built by October 2020, according to the Ministry of Energy. The objective of having 180 charging stations by the end of 2020 was disrupted by the Covid-19 pandemic, but the government remains confident in its ability to build around 2500 of them by 2025. Related: UAE To Curb Supply To Asian Buyers The 55/2019 decree passed by Indonesian President Joko Widodo, which aims to accelerate the deployment of battery-vehicles in the country, was a big step forward for the EV industry. To further enhance the price-competitiveness of electric vehicles, the Indonesian government decided to offer financial help to the sector. On March 16th, Jakarta cut taxes to 0% for EVs in an attempt to boost domestic EV production.
For now, Indonesia’s largest foray into electric car deployment has been led by the State-owned TransJakarta, which operates electric buses that can already be seen driving on the foggy streets of Jakarta. The taxi fleet of the capital also underwent an electric transformation, with the Blue Bird company which bought Tesla vehicles.
Jakarta succeeded in attracting major automakers to produce EVs locally. Among them was Toyota, which announced plans to start production in Indonesia in 2022. Joko Widodo is also engaged in talks with Tesla in what looks like a potential investment deal, although nothing official has been announced. Mitsubishi and Hyundai have also expressed strong interest in the country’s plan and are investing in future joint projects.
A window of opportunity for China
The most relevant partner for Indonesia achieving its EV projects would be China. “We invited everybody and no-one came, except the Chinese”, said Chief investment minister Luhut Panjaitan, quoted by the Asian Times. The two countries notably intensified their energy ties with a $2 billion coal deal signed in November 2020.
Chinese steel giant Tsingshan is also involved in a deal with the mining company Freeport for the construction of a copper smelter, copper being a key component in EV fabrication. At the same time, Tsingshan announced an investment for 2000 MW in renewable energy sources to power Indonesian steel production and nickel processing facilities for batteries.
Related: 13 Million Barrels Of Oil Could Be Affected By Suez Canal Blockage
In December 2020, CATL, the largest Chinese battery producer, was also in talks with Jakarta over battery production. Indonesian Minister of Energy touted a $5 billion investment into a new battery manufacturing plant, planned to enter operation by 2024.
However, in its battle to become the Asian EV hub, Indonesia is facing stiff competition from its neighbors Singapore and Thailand. After a decade of uncertainty over EVs, Singapore recently decided to ramp up investments in the emerging sector. In the framework of its 2030 Green New Plan, the government announced the installation of 60 000 charging stations for its public car park by 2030. Thailand, on its part, also put in place preferential tax regimes for EVs.
ADVERTISEMENT
Beyond foreign competition, the main challenge for the development of EVs in Indonesia remains at the consumer level. Namely, it is their prohibitive price. Mostly demanded by the upper-class, their cost is between 400 million and 1,4 billion rupies - almost twice the average price of conventional vehicles sold in the country.
By Tatiana Serova for Oilprice.com
More Top Reads From Oilprice.com:
- Oil Prices Drop On Third Wave Of Coronavirus Lockdowns
- How Will We Pay for the Energy Transition?
- Pandemic Puts Saudi-Kuwaiti Oil Plans On Ice
