Lack of infrastructure, incentives could put the brakes on Indonesia's EV development

INDONESIA'S plans to push for electric vehicle (EV) adoption could be hampered by an insufficient infrastructure network and a lack of financial incentives to encourage car owners to make the switch, said a DBS report.

"The government may have to take the lead to build EV charging infrastructure instead of relying on private investors," said analysts from DBS Group Research.

They noted that the investment into EV charging could potentially be huge in order to provide sufficient coverage for motorists, adding that a shortage of charging points could drag on electric car and motorcycle adoption.

At the same time, more financial incentives may be needed to encourage car owners to switch.

"Benchmarking to other Asian auto markets such as China, the Indonesian government must consider a long-term financial support package to stimulate EV adoption, for both automakers and consumers," the analysts said.

These challenges come in the way of a slew of potential benefits EVs could bring to the Indonesian economy, especially with the government viewing them as "pivotal" for the country.

The government has set a target of 2.1 million electric motorcycles and 400,000 electric car sales by 2025. By 2030, the figures are expected to reach 2.5 million and 600,000 respectively.

By 2040, only electric motorcycles will be sold, while all vehicles sold by 2050 will be electric.

Shifting to EVs will not only help the economy harness its natural strengths, drawing on its rich resources, it could also help the country make progress on its low-carbon energy transition, DBS noted.

The government has made a committment to reduce greenhouse gas emissions by 29 per cent by 2030, equivalent to 826 million tonnes of carbon dioxide.

"Achieving the eventual goal of a manufacturing EV powerhouse and faster adoption will require sufficient legwork through policy support, consumer interests and an efficient infrastructure backbone," DBS analysts said.

Indonesian authorities have put in several incentives to support EV development, including corporate tax cuts to attract automotive companies to invest in the country.

At the same time, Indonesia is planning to produce its own EV batteries, since it has one of the world's largest reserves for nickel and copper, which are key for making lithium-ion batteries.

Several companies have expressed interest, including China's Contemporary Amperex Technology (CATL), South Korea's LG Chem and carmaker Tesla.