Indonesia banks on lithium batteries, EVs
Jakarta
INDONESIA is betting big on being a major player in the development and production of electric vehicles (EVs), based on the strength of the country's rich natural resources. South-east Asia's largest economy is also the largest producer of nickel, a vital component in the production of lithium batteries that power EVs.
According to Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan, Indonesia could become the world's second or third-largest producer of lithium batteries by 2027, effectively plugging the country into the global EV production supply chain.
"The key is the lithium battery, and we have the world's largest nickel ore reserves. Several years ago, we began to develop the downstream industry [FOR
NICKEL]but we couldn't do that alone. We didn't have the full technological application so we engaged with China," Mr Luhut said in a recent media interview. "We are now able to produce iron steel and carbon steel; and by 2024 we will have the capability to build lithium batteries because we can extract cobalt from low-grade nickel ore," he added.
After years of trying to build downstream industries based on its rich natural resources, Indonesia's strategy to become a global producer of lithium batteries may be on the right track. It has already attracted interest from car giants Hyundai and Tesla, both of who have indicated that they are studying the possibility of stablishing EV manufacturing plants in Indonesia.
In its latest industry report, Fitch Solutions said that it believes Tesla's investment proposal will propel Indonesia into a global player and an integral component supplier in the global EV supply chain.
The analysis is based on recent announcements from Contemporary Amperex Technology (CATL) to build a US$5 billion battery production facility and LG Chem, which signed a memorandum of understanding on a US$9.8 billion investment in the country's EV sector.
Moving beyond being a major lithium battery producer, Indonesia has also set an ambitious target of having 2.1 million electric motorcycles and 2,200 electric cars on its roads by 2025.
In 2019, President Joko Widodo issued a government regulation on luxury taxable goods which could act a huge boost to EV in the country when it takes effect in October 2021. The regulation will alter the taxation system on vehicles from one based on engine size to one based on emissions. Vehicles that are currently levied 40 per cent luxury tax will fall to 20 per cent, while vehicles that emit less than 150 g of carbon dioxide will attract lower duties of 15 per cent.
"This regulation follows the general direction of most countries by using an emission-based taxation system and once effected, we will see a movement towards more green and clean vehicles, including EVs," said Ramesh Divyanatahan, managing director of BMW Indonesia. "This is where the issue stands. To have more EVs in Indonesia, the tax and incentive structure needs to be supportive - especially since batteries are currently expensive, and consumers are not willing to pay a higher price for EVs."
He noted that large car manufacturers will have to strike the right balance between maintaining current production of vehicles with internal combustion engines and EVs, given the fact that profits from combustion engine vehicles are still higher.
Another challenge that Indonesia will have to be overcome is building the infrastructure such as charging stations and distribution centres. Both state utility provider PLN as well as state-owned oil producer Pertamina, which currently operates petrol stations across the country, have been tasked with providing charging stations.
Based on the Public Electric Vehicle Charging Station Roadmap, charging stations can be provided in shopping centres, office areas, petrol stations, apartments and supermarkets. As at May 2020, there were 57 charging stations in 35 locations across Java and Sumatra.
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