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Analysis: Govt sets ambitious EV target for 2024 as adoption below par

Jakarta Post - January 24, 2024

Tenggara Strategics, Jakarta – The Indonesian government has major work ahead for its electric vehicle (EV) ambitions as fewer than 1,000 units of fuel-based motorcycles were converted to electric ones in 2023, falling far short of the 50,000-unit target.

For 2024, a more ambitious target of 150,000 units has been set, a feat the government hopes to achieve through a multitude of approaches. Concurrently, the government appears to be prioritizing investments from foreign carmakers to boost the domestic adoption of electric cars.

In a recent press briefing, Energy and Mineral Resources Minister Arifin Tasrif admitted to feeling ashamed of last year's results of the electric motorcycle conversion program. According to him, the ministry did not expect such results because many people had registered for the program.

Consequently, the program's lackluster results have impacted its budget absorption, with only Rp 4 billion (US$255,820) utilized from the allocated Rp 350 billion. Despite this, the ministry aims to maintain the program's budget availability.

To encourage the public's shift from fuel-based motorcycles to electric motorcycles, reports state that so far the government has increased promotional and collaboration efforts with various ministries, agencies and state-owned enterprises (SOEs) – an approach they intend to continue.

In addition to these efforts, other measures involve building infrastructure for electric motorcycles, including 932 public EV charging stations (SPKLU) and 1,772 public EV battery exchange stations (SPBKLU), as well as increasing the subsidy for electric motorcycle conversion from Rp 7 million to Rp 10 million. This subsidy, targeting not only individuals but also government and non-government institutions, remains in effect from late 2023.

Despite these efforts, Arifin explained that there was a need for further improvement in the administrative bureaucracy of electric motorcycle conversion so that payments could be made quicker and supporting services, such as electric motorcycle conversion workshops, could be expanded.

Energy and Mineral Resources Ministry Conservation director Gigih Adi Utomo had previously cited insufficient promotion, relatively high prices and public concerns about electric motorcycle components, particularly the lifespan of batteries, as contributing factors behind the public's low interest in converting their fuel-based motorcycles to electric-based. However, he assured that warranties would be offered for electric motorcycle components, specifically batteries. In case of issues with its components, users could take their motorcycles to an electric motorcycle workshop for replacement.

In anticipation of this year's electric motorcycle conversion target, Arifin said he hoped that the program could be swiftly implemented, having emphasized the urgency of Indonesia's transition from fossil energy to clean energy, particularly through electricity. Moreover, he said the policies had already been put in place and that intensive promotion for consumers was already underway.

Through its road map for the implementation of electric motorcycle conversion, the Energy and Mineral Resources Ministry aims to achieve the conversion of 5 million motorcycle units by 2026 with a further target of 13 million units by 2030.

What's more

With the government aiming to catch up on its electric motorcycle conversion targets, efforts to increase the adoption of electric cars in the country are also underway.

Recently, President Joko "Jokowi" Widodo revealed that Vietnamese electric car manufacturer VinFast would invest $1.2 billion to build an EV factory in Indonesia. The initial stage of the factory's construction will receive a $200 million injection and is set to commence this year.

Targeted for production in 2026, the factory is expected to have a production capacity of 30,000 to 50,000 vehicles per year, with a targeted workforce absorption of 1,000 to 3,000 people.

According to the Industry Ministry, which will facilitate VinFast's investment plans in Indonesia, VinFast will collaborate with local companies for the production process of its electric cars. Additionally, the company will collaborate with transportation companies as well as technology service providers for the expansion of electric taxis.

In addition to VinFast, Chinese electric car manufacturer BYD is reportedly planning to invest in Indonesia. While the details of the investment value are yet to be disclosed, BYD is poised to enter Indonesia's vehicle market this month with the launch of its Atto 3, Seal, and Dolphin models.

According to Investment Ministry Investment Promotion deputy Nurul Ichwan, BYD is actively searching for the optimal location for its factory, which is expected to begin construction this year. Furthermore, Nurul noted that the factory may exclusively focus on EVs, without incorporating a battery factory, as BYD utilizes Lithium Ferrophosphate (LFP) batteries, which are non-nickel based.

What we've heard

Sources in the automotive industry state that the plans for Vinfast and BYD to enter Indonesia are making Hyundai and Wuling uneasy. "Especially for BYD, whatever the government has offered, they are ready," said the source.

BYD is targeting a global sales goal of 6 million units, which is why they are expanding into potential countries, including Indonesia. Globally, they are considered a rival to Tesla. In China, BYD is the number one automotive manufacturer in terms of vehicle sales, reaching nearly 3 million units.

They are also rumored to have a highly potential electric vehicle ecosystem to offer in the IKN project, including not only electric cars but also electric buses, trains, and even solar panel power plants.

In Indonesia, both the Blue Bird Group and the Bakrie business group have already been using electric vehicles made by BYD.

Unlike other manufacturers planning to build battery factories as part of the electric vehicle ecosystem, BYD will first collaborate with local partners to build more charging stations.

BYD is reportedly not planning to build a battery factory because their batteries do not use nickel as a raw material. BYD has developed lithium-iron phosphate battery technology known as the Blade Battery.

In contrast to BYD, Vinfast will sell vehicles in the range of Rp 300 million per unit. However, this does not mean there won't be more expensive options. The market is reported to be broader, especially considering Indonesia's significant market potential. That's why Vinfast is only establishing an assembly plant, however they are prepared to build a battery plant.

Vinfast is rumored to launch at IIMS. According to other sources, the inauguration of dealerships in Jakarta indicates their readiness to start selling. The number of dealerships is expected to increase.

[This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia's political and business landscape.]

Source: https://www.thejakartapost.com/opinion/2024/01/24/analysis-govt-sets-ambitious-ev-target-for-2024-as-adoption-below-par.htm