Asa Indonesia becomes the cornerstone of the global electric vehicle supply chain

Indonesia has a great opportunity to be actively involved in the global electric vehicle supply chain.

KOMPAS/MOHAMAD FINAL DAENG

The atmosphere at the HPAL factory owned by the Harita Nickel group on Obi Island, South Halmahera Regency, North Maluku, on Sunday (9/4/2023). The facility processes nickel ore into a product called MHP that serves as an intermediary material for the production of electric vehicle batteries.

JAKARTA, KOMPAS — There is not a single country in the world that is able to fulfill all elements of the electric vehicle ecosystem independently, opening up opportunities for Indonesia to be further involved in global electric vehicle supply chain.

The Head of the Center for Economic Research on Industry, Services, and Trade at the National Research and Innovation Agency (BRIN), Umi Mu'awanah, stated that besides Indonesia, there are currently Vietnam, Thailand, and Malaysia in the ASEAN region that already have a basis for electric vehicle production. However, compared to the other three countries, Indonesia is superior in terms of raw material availability.

In terms of production, Indonesia has a wealth of natural resources nickel which is the raw material for batteries. "Global electric vehicle manufacturers can get certainty of production raw materials from Indonesia," he said in a mini symposium held by BRIN entitled "Electric Car Ecosystem Challenges in Indonesia", in Jakarta, Wednesday (24/4/2024).

Also read:Electric Vehicle Ecosystem Development Requires Advantage Mapping

According to Umi, the production of electric cars in the country has the potential to be more efficient because battery raw materials such as copper and nickel are easily obtained domestically. This production efficiency can increase Indonesia's competitiveness as an electric car producer.

However, in reality, the selling price is still relatively expensive for Indonesian consumers. In the Indonesian market, cars that sell well have a price below Rp 300 million per unit. Meanwhile, the price of electric cars from various brands is mostly still above Rp 700 million.

"The phenomenon of electric car prices being higher than fuel-powered cars is not only happening in Indonesia, but also around the world," said Umi.

KOMPAS/PRIYOMBODO

An example of a battery for electric vehicles was displayed at the Green Energy exhibition at JIExpo Kemayoran, Central Jakarta, on Thursday (7/3/2024). The battery is an important component for the development of electric vehicles.

A researcher at the Center for Industrial Service and Trade Economics Research at BRIN, Rendi Febrianda, believes that the government can reduce the increase in production costs for electric vehicles through sustainable localization policies. This is because the increase in demand for metals can easily raise the production cost of electric vehicles.

He illustrated that the conventional vehicle's metal requirements consist of aluminum and steel, while electric vehicles require lithium, copper, and nickel supplies for their batteries. "The increased demand will have an impact on price hikes, so downstreaming must continue," he said.

Although electric vehicles are relatively more expensive, based on demand in the domestic market, Indonesian society's interest in electric cars is growing consistently and significantly, reflected in the rapidly rising market absorption, from 700 units in 2021, then 10,000 units in 2022, and becoming 17,000 units in 2023.

Domestic demand

In the domestic market, infrastructure readiness also needs to be continuously improved to drive demand for electric vehicles from the community. Umi appreciates the steps taken by the Indonesian Government, which is currently focusing on building the domestic electric vehicle market by creating public perception about the benefits and urgency of switching to electric vehicles.

"The government's main task is to create a legal umbrella and provide incentives to the business and community sectors, as well as build supporting infrastructure for electric vehicles, such as public electric vehicle charging station facilities (SPKLU)," said Umi .

The government has also released incentive stimuli to encourage the population of electric cars through the issuance of Presidential Regulation (Perpres) Number 79 of 2023 on Amendments to Presidential Regulation Number 55 of 2019 concerning the Acceleration of the Battery-Based Electric Motor Vehicle (KBLBB) Program.

GAIKINDO

Infographic shows the development of production and sales of electric cars in Indonesia during January-December 2023. Source: Gaikindo

The Presidential Decree which was promulgated on December 9 2024 provides a number of tax incentives, namely fiscal incentives for tax relief on import duties, Luxury Goods Sales Tax (PPnBM), and regional tax reduction for KBLBB. This applies to imported cars in a complete state (completely built up/CBU) and cars imported in a component state (completely knock down/CKD) with domestic content levels (TKDN ) below 40 percent.

Regarding the development of a wastewater treatment plant, Director Retail and Commerce of PT Perusahaan Listrik Negara (Persero) or PLN Edi Srimulyanti stated that to date, the company has operated 1,299 wastewater treatment plants and 9,600 public electric charging stations (SPLU) in various locations throughout Indonesia.

Until the end of 2024, PLN plans to add 3,000 SPKLU (electric vehicle charging stations) points. Of that amount, 1,000 SPKLU points will be installed on the ground, while 2,000 points will be installed or attached to electric poles. PLN has conducted trials for the installation of SPKLU on electric poles, one of which is the prototype placed in the area of Yasporbi I Elementary School in South Jakarta.

More extensive education is needed regarding the differences between driving an electric car and a conventional car.

"To boost investment interest in developing SPKLU and SPLU, PLN invites collaboration with partners through a 50 percent discount offer for the change of electricity power. This way, partners can more freely install SPKLU and SPLU facilities," said Edi.

In addition, he added, communities that own electric vehicles can also receive a 30 percent discount on electricity usage for battery charging between 10 p.m. and 5 a.m. "Incentives like this are important so that the electric vehicle ecosystem can develop quickly," Edi added.

Technology adaptation

When contacted separately, Secretary General of Gaikindo, Kukuh Kumara stated that besides the fact that the prices of electric vehicles are relatively more expensive than conventional vehicles, there are also challenges in adapting to the technology which hinder the penetration rate of the electric vehicle market ecosystem in Indonesia.

KOMPAS/PRIYOMBODO

Technicians are performing maintenance on an electric car at the official Wuling Prima Kebon Jeruk workshop in West Jakarta, Friday (5/4/2024). Ahead of the Eid al-Fitr holiday in 2024, the government ensures that public electric vehicle charging stations (SPKLU) are available at several points along the exodus routes in Java and Sumatra.

According to him, after years of driving fuel-powered cars, consumers certainly need to adjust to switching to electric vehicles. There are new habits that need to be changed, such as no longer filling up gasoline but instead charging the vehicle with electricity. In addition, there is a need for broader education on the differences between driving an electric car and a conventional car.

Meanwhile, from the perspective of car manufacturers, they must prepare a new system for manufacturing electric cars. Manufacturers need to prepare raw materials for the production of electric vehicles, such as batteries that make up about 40-60 percent of all components. They need to continue innovating to create reliable and more affordable vehicles.

"Considering that the price is relatively more expensive and uses new technology, electric cars in Indonesia are mostly not purchased by consumers who are buying a car for the first time. "In fact, the market for first time buyers is also large," he said.