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The Future is Electric: Indonesia’s Readiness

The Future is Electric: Indonesia’s Readiness to Transform into the Electric Vehicle

With people’s increased awareness of climate change and several countries’ ambition to achieve low to zero carbon emissions, the automotive industry’s transformation into the electric vehicle (EV) has accelerated around the world, including in Indonesia. As one of the countries with untapped potentials in the automotive industry and Indonesia’s commitment to reduce emissions by 2030 by 29% under Indonesia’s 2015 INDC as the implementation of COP 21 UNFCCC, development of EV in Indonesia becomes inevitable. However, there still remains a big question on whether Indonesia is really ready to shift its automotive industry into EV. In relation with this, we have mapped three big issues on development of EV in Indonesia, which are acceleration of EV usage, development of EV infrastructure and battery manufacture.

In order to accelerate EV usage, the government of Indonesia has set manufacturing of EV on the priority list under “Making Indonesia 4.0” roadmap issued in 2018 and grant tax incentives as well as non-tax incentives under Presidential Regulation No. 55 of 2019 on the Acceleration of Battery EV Program for Road Transportation (PR 55/2019) and Government Regulation No. 73 of 2019 on Types of Taxable Goods Categorized as Luxurious in the Form of Motor Vehicles that are Subject to Luxury Goods Sales Tax and The Ministry of Energy (GR 73/2019) in the form of exemption on certain tax obligations and certain road restrictions. Further, in connection with manufacturing of EV in Indonesia, as to the issuance of the Omnibus Law and its implementing regulations, the Government of Indonesia has provided ease of doing business hence direct investment on the EV manufacturing sector shall be attractive for the investor.

Despite of incentives granted by the government, readiness of the EVs supporting infrastructure also plays essential part on development of the EVs in Indonesia. Through the enactment of the Ministry of Energy and Mineral Resource Regulation No. 13 of 2020 on the Provision of Charging Infrastructure for Battery Based Electronic Motor Vehicles (MR 13/2020), the government also shows its effort to accelerate the development of EV infrastructure, which comprises of charging facilities (i.e., private electricity installations and public electric charging stations and battery exchange stations) through assignment to PT Perusahaan Listrik Negara (Persero)(“PT PLN”) to conduct the provision of charging facilities. However, the MR 13/2020 also gives opportunity of other business entity to engage in the charging infrastructure business industry through cooperation with PT PLN.

Further, as the government Indonesia also aims to make Indonesia an EV battery producer and exporter, given that Indonesia has an abundant amount of nickel, despite of Indonesia’s lack of experience in battery industry, the Ministry of State-Owned Enterprise is currently working on collaboration between Indonesian state-owned-enterprises and private players to establish EV battery manufacturer in Indonesia.

The adoption of EV in Indonesia is the right step to take, given that it could reduce the emissions that caused air pollution in Indonesia.  The government has been given its best effort to support the development of the EV industry in Indonesia. However, the price of EVs that still out of reach for certain people and become the barrier to the effective implementation of EVs in Indonesia. To increase the market demand and public interest towards the EV, the incentive provided by the government shall be supported by people’s purchasing power. With noting that, several countries (e.g., China, Japan, and Thailand) have successfully increased their market demand on EV by taking the same steps that Indonesia already takes (provide tax incentives for EV).

In connection to the readiness of Indonesia’s regulatory framework to support EV development, although the government of Indonesia’s policy initiative is still far from the ones made by the governments of other countries, such as Norway, England, Germany, India, and the USA to ban sales of cars that run on fossil fuel as an energy source, the government of Indonesia has set manufacturing of EV on the priority list under “Making Indonesia 4.0” roadmap issued in 2018.