The EV Market in Indonesia: A Push to Become a Leading Manufacturing Base in the Southeast Asian Region

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1Q 2024 | IN-7188

Indonesia aims to establish the largest Electric Vehicle (EV) manufacturing base in the South-East Asian region. This insight covers the EV landscape in Indonesia, recent relaxing of regulations to encourage incentives, and the following impacts on stakeholders of the ecosystem.

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Indonesia Extends EV Automotive Deadline to Appeal to Foreign Investors


As of August 2023, the Indonesian government had extended their timeline for manufacturers to qualify for Electric Vehicle (EV) incentives by two years to attract more foreign investment into the country’s growing EV market. The new extension and more lenient regulations will now require EV makers to manufacture at least 40% of their EV components in Indonesia by 2026 to qualify for incentives set out by the government. This news follows the US$ 375.3 million expansion of Mitsubishi Motors production facility and capability to include its Minicab-MiEV electric car in 2024 and Chinese EV manufacturer Hozon Auto’s move into the Indonesian market for EV sales, assembly, and production commencing December 2023. Previously, Wuling Motors and Hyundai Motor Group established operations in Indonesia.

Indonesia Holds Strong Promise of Becoming the Region's Leading Market of EVs


Indonesia is the largest automotive market in South-East Asia and has the second largest production center in the region, after Thailand. Between 2021 and 2022, Indonesia reported a 700% growth in EV sales. Furthermore, the government plans for more than 6,300 EV charging stations and 10,000 battery swap stations by 2025. In the latest extension of the timeline, the government has agreed to lower the barriers to entry for more EV manufacturers to enter the market by reducing import duties from 50% to zero for both completely knocked down (CKD, or assembled domestically) and completely built up (CBU, or imported) vehicles. The Indonesian government will also reducing the value-added tax on EVs from 11% to 1%. To qualify for these incentives, EV manufacturers will have to produce at least 40% of their EV components or vehicles in Indonesia by 2026. Currently, these incentives have been granted to Wuling Motors and Hyundai Motor Group as both companies have demonstrated strong sales in the Indonesian EV market.

Over the past few years, under the outlined National Medium-Term Development Plan for 2020 to 2024, the Indonesian government highlights the manufacturing of electric vehicles along with expanding the capacities of science, technology, and innovation to include research on EV infrastructure (i.e., raw materials to support the production of lithium-ion batteries, EVs, and fast charging systems). Some market drivers for EV manufacturing in Indonesia, on the other hand, include the country’s abundance of raw materials (i.e., nickel, cobalt and bauxite), particularly to produce lithium-ion batteries and vehicle bodyshells. Another influence is also the push towards Indonesia’s sustainability objectives, of which aims to achieve a 32% reduction in emissions by 2030. Presently, Indonesia’s traffic congestion and subsequent high levels of carbon emissions by motor vehicles seek to be remedied by the shift towards EVs. Furthermore, as the Indonesian capital is relocated from Jakarta to Nusantara, the government intends to build a new sustainable and intelligent transport system with electric cars, buses, and motorcycles at the new capital.

Strong Vertical Partnerships and Collaborations Within the Ecosystem are Still Necessary for Widespread Adoption of EVs in Indonesia


To further comprehend the push towards bolstering the EV market in Indonesia, ABI Research has broken down the recommendations and impacts for the following stakeholders:

  • Impact on consumers: Consumer readiness and adoption may take some time. Along with this, EV infrastructure will also take some time to be fully established, especially in rural and suburban areas, which will consequently affect the adoption of EVs. To combat this in the long run, the Indonesian government should consider investing into promoting the green vehicle mindset, for instance in knowledge-based campaigns to pique interest and awareness as well as promoting EVs as a means to achieve the country’s sustainability goals by 2030. The overarching message should convey a necessity for products and solutions that consider long-term, greener solutions.
  • Impact on other EV manufacturers: The Indonesian government’s relaxing of regulations should encourage additional investment into the region’s EV market. This may affect other EV companies such as Tesla, BYD, and Li Auto, for example, as they could be companies of interest for the Indonesian government. Moving forward, regulations that allow for simplifying partnerships with the government could help maintain EV manufacturing goals: for instance, stimulating research and innovation in longer-lasting EV batteries and battery manufacturing. Presently, government owned power infrastructure company, Perusahaan Listrik Negara (PLN) is working on building the EV charging infrastructure as well as battery development, including the mining of natural resources, for the country.
  • Impact on private sector stakeholders in the EV market: Private stakeholders in this instance refer to enterprises involved in boosting EV infrastructure, such as EV charging ports, fast charging systems, and battery manufacturers. Partnerships between these stakeholders and the government could be key differentiating factors to ensure the uptake of EVs by the consumer market. Partnerships would entail expanding charging infrastructures nationwide, investing in affordable supercharger innovation and technology. Similarly, the costs of building and maintaining EV infrastructure may be a concern for consumers, which may be addressed and alleviated through the establishment of these partnerships.

Overall, should the Indonesian government set its sights on achieving its target of 600,000 EVs produced by 2030, there will need to be more collaboration and partnerships between all stakeholders of the EV ecosystem. Setting a robust EV ecosystem foundation to support the long-term objectives is crucial.