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Jokowi orders EV switch to boost demand
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resident Joko “Jokowi” Widodo has mandated the use of electric vehicles (EVs) for government officials across the country in a move aimed at expediting the country’s transition to battery-powered transportation, but experts say that this alone will not mean the general public will follow suit.
Presidential Instruction No. 7/2022, in effect since Tuesday, orders agencies and institutions at both the central and regional level, including the Indonesian Military, National Police, Attorney General’s Office and state-owned enterprises (SOEs), to devise policies and budgets accommodating the switch.
The instruction provides some leeway on how to procure EVs, allowing officials to purchase, lease or convert existing vehicles, with state funds used to finance most of the transition.
Jokowi instructed officials to formulate policies to speed up the EV transition, for instance by imposing a moratorium on conventional vehicle procurement within the government, shifting subsidies from fossil fuel-powered vehicles to EVs and asking state-owned lenders to ease loan disbursement for EVs.
“The presidential instruction is proof of the President’s commitment to carrying out the energy transition from fossil fuels to renewable energy,” Presidential Chief of Staff Moeldoko claimed in a statement published on Thursday.
Read also: Time to switch rides as fuel gets pricey, EV carmakers say
The instruction came shortly after the government raised the price of subsidized gasoline and diesel by 30 percent on Sept. 3 to prevent a further ballooning of the state budget’s allocation for energy subsidies and compensation.
The policy of keeping gasoline and diesel cheap at a time of high global oil prices will cost the state hundreds of trillions of rupiah this year.
The government has defended the increase as unavoidable as Finance Ministry estimates put the benchmark Indonesian Crude Price (ICP) at US$105 per barrel for the full year.
Moeldoko said the service-vehicle transition would allow the government to cut fuel consumption and rely instead on electricity, which is much cheaper.
Indonesia Battery Corporation (IBC), a consortium formed by four major state-owned enterprises to make Indonesia a leading player in the global EV supply chain, estimates the switch from fossil fuel to batteries could slash costs by 25 to 35 percent, and that switching 30 percent of all vehicles in the country would save Indonesia nearly 30 million barrels of oil annually.
Institute for Essential Services and Reform (IESR) executive director Fabby Tumewa told The Jakarta Post on Thursday that the move would create demand for a large number of EVs across the country.
If executed well, he estimated, EV demand for two-wheelers could reach between 150,000 and 200,000 units annually, while for cars, it would be between 30,000 and 40,000 units every year. The calculation was based on the government’s target to operate more than 800,000 EVs as service vehicles by 2025.
“The government is intentionally creating a market. The effect could be huge. EV producers would operate at full capacity. What are the implications? It will push down the cost, making EVs more affordable to the public,” Fabby said.
However, Fabby said the success of the program would depend on each government agency making available the necessary funds, which could prove difficult given tight fiscal space next year amid other priorities, particularly for infrastructure, the new capital and fuel subsidies.
Finance Ministry Budget Director General Isa Rachmatarwata told the Post on Thursday that the ministry had prepared funds for replacing service vehicles, as it did every year, but he noted that vehicles would be replaced only if certain criteria were met.
“If it is still new, then we will not rush into replacing it,” he said.
Jakarta-based auto expert Bebin Djuana, who served as an executive of a major car producer, cautioned that it would take a considerable amount of time before the cost of EVs came down to match the means of the general public in Indonesia.
“We know that one of the largest hindrances for the public to switch to EV is the high cost,” Bebin told the Post on Thursday. To push their prices down, more producers would have to enter the market, he said.
Read also: Government hikes fuel prices to rein in ballooning subsidies
Bebin said a surge in EV adoption by government agencies might spur the installation of charging stations in many regions to some degree, but added: “It won’t be enough. Even if [the number of stations] reached 20,000, that would still be far from enough. At least, it should be as many as filling stations.”
An inadequate number of charging stations would keep the public from transitioning to EV, he said.
