Centuries of our reliance on fossil fuels have led us to the point where we need to shift away from it. Presently, fossil-based transportation is still the norm across the globe, both in private and mass transportation. In Indonesia, conventional modes of transportation provide accessible and affordable movement, with most people using cars and motorbikes on a daily basis.
Despite the dominant presence and convenience, conventional fossil-based transportation contributes to damaging pollution, especially in big cities. A lack of balance between growing fossil-based transport and environment maintenance causes pollution that leads to health problems, traffic jams and environmental issues. Aside from the detrimental effects on the environment, fossil fuels are also a depletable resource. It is estimated that if we keep using fossil fuels at our current rate, all our fossil fuels will be depleted by 2060. While new reserves may possibly be found before we reach that point, the situation points out the importance of looking more into the utilization of renewable energy sources. Electric vehicles or EVs offer a great solution for the aforementioned issues. On the environmental side, EVs improve air quality as they use friendlier and cleaner energy, providing a better environment for the public. For technological development, electric vehicles drive innovations in the local technology, engineering, and manufacturing industries. The Indonesian government also expects domestic electric vehicles to be the nation’s production and export base for motor vehicles. The government expects Jakarta and Bali to become model cities for EV implementation. As respectively the country’s capital and the international tourist destination, Jakarta and Bali are suitable cities to test out EVs as a mode of mass transportation while simultaneously showcasing their use to a broad audience.
As the Ministry of Industry of Indonesia has stated on its website, Indonesia aims to have 400,000 units of electric cars in 2025 and 5.7 million units in 2035. To prepare for this, the government has formulated several regulations stemming from Law No. 30 Year 2007 on Energy. In 2017, the government issued Presidential Regulation No. 22 Year 2017 on General Planning for National Energy, stipulating policies on EV development.
They also released Presidential Decree No. 55 Year 2019 on Acceleration on Battery Electric Vehicle Program for Road Transportation. The decree outlines the measures that the government plans to take to promote and accelerate the implementation of battery electric vehicle (BEV) programs in Indonesia. It sets out five primary directives to accelerate these programs: accelerating the development of the domestic BEV industry, the provision of incentives, the provision of charging stations and regulating electricity tariffs for charging electric vehicles, satisfying the technical requirements of electric vehicles, and environmental protection. Earlier this year, four state-owned enterprises, namely PLN, Antam, Inalum, and Pertamina, formed Indonesia Battery Corporation (IBC) to support the government’s increasing the added value of more strategic mineral commodities. IBC is open to establishing partnerships for downstream projects based on profitability, and it includes market access capabilities and fund support to develop mineral production from company reserves. Some companies have already adopted EVs on the commercial front and set their sights toward the future. Local taxi company Bluebird has started utilizing electric vehicles in its fleet, traveling up to 400 km per charge. Ride-hailing company Grab has also launched its first fleet of electric cars in early 2020, with a pilot service of 50 EV cars starting at Soekarno-Hatta International Airport. The industry has also been attracting top international automotive players. PT Electric Circle Optimum, a Hong-Kong based firm, is investing in the sector, including two-wheeled, three-wheeled, four-wheeled, and more, and has set up a factory in Surabaya, East Java.
The government of Indonesia provides investment incentive opportunities for incoming investors in the sector. They will experience a more straightforward vehicle testing process and more accessible methods for obtaining licenses for foreign workers for their companies. Many fiscal incentives are also available, from tax allowances and holidays to super deductible tax. The government also plans to build green lanes on public roads. It seems that the path to a greener future and better investments is only just starting for EVs.
South Korea’s Hyundai and LG responds well to Indonesia’s investment policy regarding electric cars. The two companies signed a memorandum of understanding to build an electric vehicle battery factory in Indonesia. Under the agreement, Hyundai and LG Energy will invest a total of $1.1 billion. The Indonesian government has agreed to offer incentives and rewards to support the plant. The construction will start in the fourth quarter of 2021 and will be completed by 2023. The facility is expected to commence in the first half of 2024.
“We will oversee this battery cell investment from start to finish,” said Bahlil Lahadalia Minister of Investment of Indonesia/ Chairman of BKPM.