The electric vehicle (EV) market in Indonesia is pretty much nonexistent at the moment. But unlike most Southeast Asian countries, Indonesia has a built-in advantage as it attempts to bring EVs into its vehicle mix. That advantage is Indonesia’s fully developed auto manufacturing industry. It is the region’s second largest, right behind Thailand. Even better, Indonesia is the largest single vehicle market in Southeast Asia, with a great deal of potential future growth. Only eight of every 100 Indonesians currently own a car.
But while Indonesia’s many factories are theoretically ready to pump out a steady stream of EVs for Indonesian consumers, there are some significant obstacles that will first need to be overcome.
A Bold Plan For An EV Future
Jakarta is the largest city and also the capital of Indonesia. Combined with its metropolitan areas, it has a population of over 30 million. This makes it the second largest urban area after Tokyo, Japan. It suffers from poor air quality, and traffic congestion to the point of gridlock. The Indonesian government sees EVs as a way to reduce fossil fuel emissions, as well as drive innovation in its own auto industry.
In the pursuit of these goals, the government has released a plan that mandates the development of EVs. In 2025, there must be 2,200 EVs sold, with 20 percent of all vehicles sold that year being hybrids or EVs. A total of 2.1 million electric motorcycles have also been mandated.
The Indonesian government also plans to reduce fossil fuel emissions 29 percent by 2030, and ban sales of fossil-fueled vehicles by 2040. For the moment, this is merely wishful thinking. There has not yet been an EV produced in an Indonesian auto plant.
Government Policies Have Not Yet Been Set
The best way to build up the numbers of EVs in Indonesia short-term would be to import them from outside the country. Unfortunately, a 40 percent luxury goods tax is currently imposed on imported EVs. Import duties can also be as high as 40 percent. A company importing the Tesla Model X into Indonesia is selling it for $200,000. This is about double what it would cost in the US. There has been talk of reducing the luxury tax to zero and the import duty to 5 percent, but nothing has been decided yet.
The Indonesian government would prefer to have the EVs sold there to be built there, by its local manufacturers. Achieving this could also make Indonesia a net exporter of EVs, which would be very good for the industry and the country.
Charging Infrastructure Is Lacking
A major factor holding back the development of Indonesia as an EV-friendly country is its lack of charging infrastructure. There will not be any major in-country EV production or sales until there are plentiful charging facilities. Even the major EV manufacturers like Nissan and BMW will not import their EVs into Indonesia until there are many more places to charge them.
In-home chargers are a solution that will cover most use cases. But if you need to make a trip, or have a long commute, a comprehensive charging network is a necessity. The entire country of Indonesia has 1,500 charging sources for EVs, but 1,100 of them are in Jakarta. This leaves very few for the rest of the country, which has a total area of over 700,000 square miles (1,900,000 km2). This is a major obstacle to the growth of EVs.
Cost Is An Issue In Indonesia
In 2017, per capita GDP for Indonesia was USD $3,876. This is not enough to support individual EV ownership, especially since EVs cost much more than the average car. It has been estimated that EVs will reach price parity with internal combustion vehicles in 2025, which could make EVs more affordable, especially if Indonesian incomes increase significantly.
Indonesia Has Dirty Electricity, But Not Enough To Go Around
Up to 20 percent of Indonesia’s people have no access to electricity. That’s a total of 50 million people. About half of the 50 million actually live in areas that have electricity, but the grid has not been fully built out to service them. That’s a major EV obstacle right there: you can’t charge an EV without electricity.
In addition, the existing grid has not kept up with increased demand, leading to frequent and long-lasting outages. How do you add a nationwide EV charging system?
Then there are the sources that Indonesia uses to generate its electricity. It is not a pretty picture:
Coal, oil, and gas: 80%
So, if and when there are a large number of EVs driving around in Indonesia, they will be running predominantly on fossil fuels. This is a common problem in the region: EVs merely shift the pollution from the cities to the power plants, which are often located in the countryside.
Indonesia Can Make EVs, But It Is Not Ready To Host Them
The country of Indonesia is unique in being a middle-income country with a well-developed auto manufacturing industry. It is fully capable of manufacturing EVs for its own needs, and those of neighboring Southeast Asian countries. But without favorable government incentives, a nationwide charging infrastructure, and a fully functioning electric grid to support it, EV progress in Indonesia will be very slow in coming.