Neta Auto and Great Wall Motor were among the Chinese carmakers making their debut at the Gaikindo Indonesia International Auto Show, hoping to tap into growing demand for eco-friendly vehicles in the world’s fourth most populous country.

Though currently a niche product, electric vehicle (EV) sales are poised for rapid growth in Indonesia. The government is aggressively promoting the country as a production hub for EV batteries and cars, while offering new consumer subsidies to shift domestic demand up a gear.

“We are very excited to enter the Indonesian market, which has huge potential for electric vehicles,” Wang Chengjie, vice president of Neta Overseas, said at the event being held on the outskirts of Jakarta. 

Neta presented three models at the show and initiated pre-orders for the popular Neta V crossover, which has a price tag of Rp 379 million ($25,000). Great Wall Motor Group (GWM), meanwhile, showcased the Ora Good Cat, a compact electric hatchback with “cat-like features” and cheerful colors that drew crowds of curious onlookers.

Neta will next year become the second Chinese car manufacturer to establish an EV assembly line in Indonesia, after Wuling began producing its AirEV locally in 2022. South Korea’s Hyundai Motor Co. also manufactures electric cars at a plant near Jakarta.  

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Japanese carmakers have long dominated the Indonesian car market. Toyota, Honda, Daihatsu, Mitsubishi and Suzuki accounted for about 85 percent of total car sales in Indonesia in 2022, according to data from the Association of Indonesian Automotive Manufacturers (Gaikindo).

Read also: Indonesian EV early adopters face long road ahead

However, they have been slow to introduce electric cars, partly due to the lack of infrastructure and incentives for adoption. Now, Chinese companies are looking to fill the gap.

While the potential for growth is huge, EVs currently account for a fraction of total automobile sales in Indonesia. Just 10,327 electric battery-powered cars were sold in 2022, or about 1 percent of combined car sales.

By 2025, the government is aiming to have 400,000 electric four-wheelers and 1.8 million electric two-wheelers on the roads.

But a range of obstacles stand in the way, including an insufficient number of charging stations, the expense of buying a car and inconsistent policies, the Institute for Essential Services Reform, a private think tank, said in a report released in February. The reliability of electricity supply could also be a problem in rural areas, it said.

To boost the demand for electric vehicles, the government has unveiled a subsidy program that will cover the sales of 200,000 electric motorcycles and 35,900 electric cars. It will also cover the conversion of 50,000 combustion-engine motorcycles to electric propulsion systems. 

For producers, the government offers zero percent export duty and value-added tax for electric cars and buses that meet certain domestic content requirements. Consumers can receive up to Rp 80 million ($5,130) for each purchase of an electric car made onshore, and the government will ensure lower ownership costs. 

The subsidy program, which began on March 20 this year, is a complement to Indonesia’s efforts to develop domestic EV production facilities to take advantage of the country’s rich reserves of nickel, a key component of the lithium-ion batteries used in EVs.

Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan has expressed hopes for Indonesia to become “one of the top three countries in the world producing EV batteries as well as electric cars” by 2027.

The government is also keen to promote electric vehicles as part of its strategy to reduce greenhouse gas emissions 29 percent by 2030.

Competition heats up

Chinese electric carmakers are not only competing with the Japanese brands, but also with other players from South Korea, the United States and Europe.

French carmaker Citroen and Germany’s Mercedes-Benz were among the brands showcasing their electric vehicles at the Indonesia auto show. 

Read also: Everyone’s talking about EVs. Should I switch?

And the government has long wooed American manufacturer Tesla to invest in car and battery manufacturing in the country. 

In May last year, President Joko Widodo visited the company’s founder and CEO Elon Musk in Texas. Tesla has also signed contracts worth several billion US dollars to purchase nickel from two companies in Indonesia.

But with early investments in Indonesia, Chinese carmakers might have a head start.

Wuling, which has been selling its conventional cars in Indonesia since 2017, sold 8,000 units of its popular AirEV small electric car last year, accounting for roughly 80 percent of Indonesia’s four-wheel EV sales.

Chinese companies Chery and DFSK Motor also have a presence in the country.

Chery, which had entered the Indonesian market in the early 2000s but failed to gain traction, returned this year with fresher products, including the sophisticated and futuristic-looking Omoda 5, the electric version of which will be on sale next year. 

While Chinese electric cars attracted interest at the international auto show, some people expressed doubts about their quality and reliability.

Arsita Kamila said the Ora Good Cat was “cute and practical” for city driving, but she would not rush into buying one.

“I wonder whether it will last long, especially the battery, because it’s the most expensive part,” she said.

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