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Window closing for EV plan
Indonesia has the biggest economy in Southeast Asia, a growing consumer market, EV purchasing incentives and the world’s largest nickel reserves.
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An electric car powers up at a charging station belonging to state electricity company PLN. (Antara/Chairul Rohman)
T
he government lacks neither enthusiasm nor effort when it comes to drawing global carmakers’ attention to Indonesia’s dream of becoming an electric vehicle (EV) hub. But that is about it, so far.
High-level visits to the United States and China have yielded no concrete results to date, disappointing anyone who may have been persuaded by premature announcements of upcoming deals.
President Joko “Jokowi” Widodo traveled to China late last month for a bilateral get-together with his Chinese counterpart, and the itinerary also included a factory tour at the country’s leading EV player, BYD.
Ahead of the trip, Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan, who was part of Jokowi’s delegation, exhibited the usual optimism, saying "BYD had expressed interest in investing in Indonesia.”
Had there been any deliverables from that visit concerning BYD, we almost certainly would have heard about them by now. Therefore, we shall assume it was yet another praiseworthy but ultimately fruitless attempt to pitch Indonesia as an EV investment destination.
Luhut, meanwhile was also scheduled to meet with Tesla’s Elon Musk on Wednesday for yet another shot at sealing a deal with the prominent United States EV firm, after previous trips to the US by himself and by the President had produced little but promises.
BYD and Tesla, meanwhile, have announced large-scale investment elsewhere.
BYD revealed last month that it wants to build three plants in Brazil for US$620 million, including one for vehicle assembly to serve the regional market. Earlier this year, the Shenzhen-based company began work on a new plant in Asian automotive industry hub Thailand. It has also shown interest in expanding in India with a $1 billion plant, though that has run up against some resistance.
Tesla has also announced plans to invest in India and reportedly wants to pour $5 billion into a massive factory in Mexico. In March, it declared its expansion in China with a new battery factory.
BYD and Tesla are the biggest and arguably the most prestigious EV carmakers, yet they are by no means the only ones. Jakarta may want to direct more of its efforts toward some of the many other brands from around the world.
For all the investment or at least investment plans Indonesia has secured in nickel processing and battery material production, its declared goal has always been to develop the entire EV production chain in the country, and that would include EV battery manufacturing and final vehicle assembly.
The window of opportunity for the country to become a major producer in this global market will not remain open for ever. Countries clinching major deals now are a big step ahead, because those factories will attract suppliers to open shop nearby.
Also, those countries are in pole position to grab a market far beyond their own borders. Of the 150,000 cars a year to be built by BYD in Thailand, for instance, only some 10,000 cars are planned to satisfy domestic demand, while the vast majority are to be exported, including, no doubt, to Indonesia.
Jetting across the world to convince would-be investors is a noble effort, but something may be lacking in Indonesia’s offer. We have the biggest economy in Southeast Asia, a growing consumer market, EV purchasing incentives and the world’s largest nickel reserves. Should global players not be scrambling to invest here?
Perhaps something is more generally amiss with Indonesia’s appeal to foreign investors? Red tape has been cited as a concern in the past, as have rigid labor regulations, land-acquisition issues and a shortage of skilled workers, as well as trouble bringing people in from abroad.
The Job Creation Law passed in late 2020 was meant to rectify such issues, but perhaps it has left too many unaddressed? The government must get to the bottom of this if it wants Indonesia to be more than a consumer market for imported EVs.
