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Gov't mulls giving incentives to electric car producers

Jakarta Globe - October 26, 2023

Jayanty Nada Shofa & Heru Andriyanto, Jakarta – The government recently said that it was mulling providing incentives to woo electric car producers into building a manufacturing plant in Indonesia.

The Southeast Asian country is pushing for automakers to produce at least 40 percent of the content of electric vehicles (EVs) in Indonesia. This policy – also known as the local content requirement – aims to spur domestic industrial development and job creation, among others.

However, only two electric car producers – namely South Korea's Hyundai and China's Wuling – have met this local content requirement, according to Rachmat Kaimuddin, a deputy at the Coordinating Ministry for Investment Affairs.

"We are thinking of providing incentives for electric motorbikes and car manufacturers. But particularly electric cars because we already have quite a lot of electric two-wheeler makers. So they are more comfortable investing in Indonesia," Rachmat said at the 2023 BNI Investor Daily Summit at Hutan Kota by Plataran in Jakarta on Wednesday.

"[As for electric cars], there are only Hyundai and Wuling who have met the 40-percent local content requirement. We hope that there will be more [automakers] who do so. We expect to introduce these incentives by the end of this year," Rachmat said.

However, Rachmat did not comment much on the incentives as the plan is still under discussion.

"So these are fiscal incentives to get automakers into opening up a factory in Indonesia," Rachmat told reporters shortly after the forum.

The era of electric vehicles (EVs) is inevitable, but for the industry to thrive in Indonesia, a robust regulatory framework is essential, said Anindya Bakrie, the chief commissioner of EV distributor company VKTR Mobility.

Speaking at the same seminar themed "Electric Hopes: Roadmap to Realize Indonesia's Battery and EV Industry," he said VKTR supplied electric buses to the municipality-owned transport company TransJakarta, which have safely transported millions of passengers.

"The electric vehicle sector has the potential to generate a significant number of jobs, so we need government support in the form of incentives and favorable regulations," Anindya added.

He claimed that VKTR is at the forefront of EV distribution in Indonesia, even before specific regulations for this sector were established. The company is currently finalizing an assembly plant in the Central Java town of Magelang to produce electric buses.

Henry Mulyadi, director of bicycle and electric motorcycle producer Terang Dunia, expressed optimism that EVs will eventually become affordable for Indonesian consumers.

"Our company is manufacturing motorcycles that will be available in the market for under Rp 20 million ($1,250)," Henry said.

The Industry Ministry data shows Hyundai's Ioniq 5 was certified for having 40 percent local content. The South Korean automotive giant has a manufacturing plant in Cikarang, West Java. Wuling also has a plant in Cikarang which began producing its EV model – the Air ev – in Aug. 2022. Likewise, the local content percentage of Wuling's Airev stood at 40.04 percent.

According to the Indonesian Automotive Industry Association (Gaikindo), wholesale of battery electric vehicles throughout 2022 totaled 10,327 units. This marks a huge jump from 687 units sold the previous year. Wuling's Air EV Long Range became the most popular electric car in 2022 with wholesale numbers reaching 6,859 units. Followed by Hyundai's Ioniq 5 Signature Extended (1,517 units) and Wuling Air EV Standard Range (1,194 units).

Source: https://jakartaglobe.id/business/govt-mulls-giving-incentives-to-electric-car-producer