Why Electric Vehicle (EV) Companies Should Invest in Indonesia’s EV Sector

The global automobile sector is steadily marching towards an Electric Vehicle (EV) revolution and Indonesia is no exception. 

The Indonesia government is fostering its Indonesian EV market by providing new opportunities for investors globally. Following President Joko Widodo’s introduction of the new Presidential Regulation, foreign EV companies interested in expanding its operations, will now benefit from more relaxed policies when setting up in Indonesia.

The EV sector is considered a priority under the recent Positive Investment List issued by the Indonesian government. Business lines in this list entitles investors to enjoy benefits, ranging from 100% foreign ownership, to leveraging various tax incentives. EV businesses with capital investment of over IDR 500 Billion will get a 100% cut in Corporate Income Tax, while investments worth IDR 100-500 Billion will receive a 50% cut in Corporate Income Tax. 

Understanding US$17 Billion Indonesia EV Roadmap 

Indonesia has an ambitious plan to become a major player in the global EV market, and it has developed a US$17 billion roadmap for this specific sector. This roadmap aims to reach an adoption of 2.1 million electric motorcycle and 400,000 electric cars – of which 20% are locally manufactured by 2025. 

Indonesia EV projects require much foreign investments support 

Part of its roadmap include local transportation operators such as TransJakarta, who aims to have an entirely electric-powered bus fleet, in less than seven years for its urban mass public transportation system. This equates to around 14,000 electric buses. 

State-owned electricity giant PLN is also involved, its goal is to provide more than 31,000 new EV charging stations by 2030. PLN has open this opportunity for private and public to invest, it’s worth US$3.7 billion over the course of 10 years. These are just some of the government’s plan to build its EV capabilities, and it signals a robust market for EV-related companies to operate in.

The government’s enthusiasm in the EV industry seems to have provide a sense of protection towards the interest of investors. Major automotive players such as Toyota and Hyundai are already in talks with authorities to start their EV and hybrid manufacturing capabilities, while LG Chem has also shown interest in setting up an EV battery manufacturing plant to boost the market.

Consumer market is young, but still growing

In 2019, 24 electric passenger vehicles were sold in the country, compared to just one unit sold in the preceding year. While the number may seem minuscule, this puts its growth rate at 2,300%. 

Research by the University of Indonesia in September 2020 even showed more interesting figures. Over 70% of its public are keen to own an electric vehicle which the environmental issue as the most common reason they favor electric-powered vehicle over traditional fossil-fuel ‘driven’ vehicles, proving that the Indonesian population has started to become more aware of EVs. 

Ride Hailing Boom – Untapped opportunity for EV manufacturers 

According to Google’s 2020 e-Conomy country insight report, Indonesia’s internet economy grew from US$40 billion to US$44 billion, with the ride-hailing and digital sector showing a continued upward trajectory. 

On a similar note, data provided by We Are Social also showed  21.7 million people (75% of Indonesia’s internet users) are active ride-hailing users. Top benefits users cited for using ride-hailing vehicles include, reduction of mobility cost of up to 65% 

With over 22% of the world’s nickel reserves found in Indonesia, the government’s commitment to reduce its emissions (29% by 2030) and a growing public interest towards environment-friendly vehicles, Indonesia has set a perfect stage for EV manufacturers to tap into this goldmine.

We Can Assist

Setting up a business overseas can be a tedious and daunting process. Cekindo’s comprehensive business solutions can help you in many facets of setting up your business in Indonesia. Our consultants have in-depth knowledge of the Indonesian Market and can conduct Due Diligence activities to help you assess the credibility of the company or partner you want to work with or acquire. Our company also provides you with adequate guidance on how to enter the Indonesian market depending on your company’s financial planning and will also assist you with all the regulatory aspects to help you leverage the best opportunities available in the EV industry.