Pandu Sjahrir, an experienced tech investor in Indonesia’s energy transition, stated that Indonesia was “at the precipice”[1] of becoming a global leader in the electric vehicle (EV) industry. Best known for exporting coal, mineral fuels, rubber, iron, and steel[2], Indonesia is diversifying its repertoire. As the world’s largest nickel producer, with substantial cobalt reserves[3] – essential components for batteries – Indonesia is well-positioned to benefit from the rising trend of battery-powered EVs, aligning with the global shift towards clean energy. Helmi Arman, Chief Economist at Citi Indonesia suggests that investments in base metals and EV battery sectors can enhance Indonesia’s trade balance and credit ratings[3]. Indonesia’s third-largest two-wheeler market[4] and its significant reserves of essential minerals for EV batteries underscore its vast potential in the EV sector. Industry experts also emphasize that the EV industry presents significant opportunities not only in vehicle production but also in expanding the entire automotive value chain[2]. However, Tesla – the industry giant – is noticeably absent. In an Asia Times article this week, Guild highlighted that this lack of progress probably “stings a little bit more”, especially when considering Tesla’s presence in neighboring countries like Malaysia and Thailand[5].

IMPLICATIONS:

Presently, Indonesia is not a major market for electric vehicles due to limited charging infrastructure and an underdeveloped national road network, making it less viable, at least for the moment, for electric cars. Instead, Indonesia is more likely to focus on electric scooters, a market Tesla does not serve. International management consulting firm Arthur D. Little suggests that electrification presents an opportunity for Indonesia to establish a local EV brand[6]. To align with major automotive economies, Indonesia should consider developing its own EV manufacturer to bolster the government’s EV agenda, reduce costs, and address charging infrastructure limitations. Furthermore, a homegrown EV brand specializing in scooters, which can be charged using standard household plugs, presents a practical solution to Indonesia’s current EV infrastructure challenges. Emulating the success of homegrown unicorns like Gojek and Grab, Indonesia has the opportunity to capitalize on its existing strengths to navigate the dynamic and constantly evolving EV landscape effectively.

[1]Sim, Dewey., (2023), “Indonesia on verge of becoming EV leader, needs ASEAN ‘collaboration’ for the region to be manufacturing hub: experts”, South China Morning Post, October 9. Retrieved: https://www.scmp.com/week-asia/economics/article/3237344/indonesia-verge-becoming-ev-leader-needs-asean-collaboration-region-be-manufacturing-hub-experts

[2]Cooper, Cameron., (2023), “What’s driving Indonesia’s economic boom?”, In the Black, October 1. Retrieved: https://intheblack.cpaaustralia.com.au/economy/whats-driving-indonesias-economic-boom

[3]Citi Research (2022), “Indonesia’s EV battery venture: Harnessing the economy’s growth potential” (Press Release), Citi Indonesia Corporate Affairs, September 16.

[4]Rasjid, Arsjad., (2023), “Indonesia is rapidly asserting itself as a formidable presence on the global stage” Euronews, October 9. Retrieved: https://www.euronews.com/2023/10/09/indonesia-is-rapidly-asserting-itself-as-a-formidable-presence-on-the-global-stage

[5]Guild, James., (2023), “Musk leaves Indonesia at Tesla’s altar”, Asia Times, October 10. Retrieved: https:/asiatimes.com/2023/10/musk-leaves-indonesia-at-teslas-alter/

[6]Uchida, Hirotaka., Do, Thao., Le, Dao., Chatisarawich, Vuttimet & Tran, Duc (Bryan)., (2023), “Unleashing Indonesia’s electric mobility potential”, Arthur Little.