An integrated industrial operation from the upstream to the downstream is vital to promoting the domestic use of electric cars. Supporting infrastructure and incentives are also needed.
By
MEDIANA/CYPRIANUS ANTO SAPTOWALYONO
·4 minutes read
LAILY RACHEV - BIRO PERS SEKRETARIAT PRESIDEN
President Joko Widodo visits the ground breaking of the electric vehicle industry in Karawang, West Java, Wednesday (15/9/2021).
JAKARTA, KOMPAS—Indonesia is starting a new phase in the transportation industry by building a factory to produce electric vehicle batteries (EVBs) in Karawang, West Java. The project, worth US$1.1 billion (Rp 15.6 trillion), is expected to generate growth momentum for Indonesia’s downstream industries. One of the challenges this project faces is how to create domestic demand for electric vehicles (EVs).
President Joko “Jokowi” Widodo officiated the pile driving ceremony for the Karawang factory on Wednesday (15/9/2021). Accompanying the President were Investment Minister/Head of the Investment Coordinating Board Bahlil Lahadalia, while LG Energy Solution CEO Jonghyun Kim and Hyundai Motor Group chairman Euisun Chung joined the event by video link from South Korea. LG and Hyundai are principal investors of this project.
According to the President, the heyday of raw material commodities has ended. Indonesia should therefore resolve to shift from a commodity-based economy to downstream operations and industrialization, in order to become a strong, developed country based on technological innovation.
“For this reason, the strategy is to speedily escape the trap of a raw materials exporting country. Eliminating dependence on imported products by accelerating the revitalization of the manufacturing industry can produce greater economic value added,” the President said in his speech.
President Jokowi added that Indonesia possessed the world’s largest reserves of nickel, a key mineral in EVB production. With this huge potential and through appropriate management, Indonesia was certain to become a major manufacturer of nickel-containing end-use products, such as lithium batteries, electric batteries and EVBs, within the next three to four years.
“If (nickel) is processed into battery cells, its value can increase from sixfold to sevenfold. And if it becomes part of electric cars, its value added will further increase by eleven times,” he emphasized.
LAILY RACHEV - BIRO PERS SEKRETARIAT PRESIDEN
President Joko Widodo (right) at the ground breaking event for the electric vehicle industry in Karawang, West Java, Wednesday (15/9/2021).
Bahlil indicated that with regard to manpower absorption, as stated in the memorandum of understanding between the government and investors, the EVB factory project must maximally employ Indonesian workers. Foreign workers were allowed as long as they qualified for specific jobs and positions. Bahlil said the South Korean side agreed with the priority employment of Indonesian citizens.
“And (there must be) also collaboration between state-owned enterprises, the LG Group and micro, small and medium enterprises, as well as national entrepreneurs in the regions. This is in line with the President’s instructions, verbal and written, and the stipulation in Article 90 of the Job Creation Law,” he said.
At the same occasion, Kim expressed his appreciation to all participating parties for making the project possible. He revealed that the planned EVB plant would apply the latest battery technologies. He believed that the battery plant would be the first stepping-stone to the global EV market beyond ASEAN.
Kompas/Hendra A Setyawan
An officer charges an electric car at the Pertamina General Electric Vehicle Charging Station (SPKLU), Jalan Fatmawati, Jakarta, Wednesday (1/9/2021). The government targets as many as 15 million electric vehicles, consisting of 2 million four-wheeled units and 13 million two-wheeled units, to operate in Indonesia by 2030.
Creating a market
Contacted separately, executive director Fabby Tumiwa of the Institute for Essential Services Reform (IESR) said the project’s concept of an integrated industry, from nickel refining to battery manufacturing, was the right direction. However, the government should first encourage domestic use of electric vehicles by tightening its electric vehicle policy.
“The government also needs to promote the development of supporting infrastructure, such as EV charging stations for the public,” he added.
Agung Wicaksono, a researcher at the Bandung Institute of Technology (ITB) Center for Policy and Governance, shared the view that EV charging stations were a very crucial need in the downstream sector. Sufficient availability of infrastructure would support the creation of domestic demand for electric vehicles. The government also needed to spread information on incentives for the use of battery electric vehicles (BEVs) to attract the public’s interest in shifting from gasoline cars to electric cars.
Meanwhile, Jongkie D. Sugiarto, first chairman of the Association of Indonesian Automotive Manufacturers (Gaikindo), expressed his hope that apart from EVBs, other electric vehicle components would also be produced domestically. This would help increase local component manufacturing and BEVs would be more affordable.
Based on Gaikindo’s research, BEV sales increased from 120 units in 2020 to 488 units in January-June 2021. The same research found that EVs still cost more than Rp 450 million per unit, whereas the public’s purchasing power for cars was around Rp 300 million. This condition limits the public’s reach in purchasing electric cars.
The government has set a 2030 operational target of 15 million EVs, comprising 2 million four-wheeled EVs and 13 million two-wheeled units. It also expects to have completed the installation of 2,400 EVB charging stations by 2025.
