The Southeast Asian country Indonesia has now finally unleashed its much-awaited subsidy program to boost the growth of electric vehicles domestically and to lead the race in this segment globally. According to media reports, the scheme has been proclaimed in an effort to expedite the adoption of EVs and magnetize investments from the major battery and car makers all over the world.
The subsidy program will commence from March 20 and in an interaction with the media, senior cabinet minister Luhut Pandjaitan and Industry Minister Agus Gumiwang Kartasasmita that the subsidy scheme will help the country to sell 35,900 electric cars and 200,000 electric motorcycles. Moreover, over 50,000 conventional engine motorcycles will be converted to electric propulsion systems.
Through this scheme, the government wants to develop the manufacturing units of this industry and also take advantage of Indonesia's massive nickel reserver, which is an important component in making lithium-ion batteries. In fact, by the end of 2025, the government has targeted to make 25 percent of vehicles fully electric. Cabinet Minister Luhut has told media earlier that Indonesia hopes to turn into “one of the top three countries in the world producing EV batteries as well as electric cars by 2027."
Although the overall allocated budget or expense for this scheme is yet to be stated by the government, as per media reports 7 million rupiahs (around $460) will be disbursed to retailers and manufacturers for every new electric two-wheeler sold or each converted to electric. The point to be noted is that in order to grab the scheme, the manufacturers must ensure that the vehicles are domestically produced or at least 40 percent of its components are locally sourced.
Luhut told Reuters that global EV makers will be attractive towards their current scheme and currently the country is said to have closing deals with two major global car firms. "We hope this new policy will make our position much stronger than before. If we don’t give (incentives), they will not come to us," reporter Reuters. As of now, no specific company names are mentioned, but past media reports suggest that Tesla and BYD could invest in manufacturing facilities in Indonesia. Back in August last year, a contract was signed by Tesla worth $5billion to purchase materials for its batteries from an Indonesian company.
Hyundai and LG on the other hand, have begun assembling electric vehicles and batteries in Indonesia. The French mining firm Framet and Germany’s BASF have stated to invest $2.6 billion to process Nickel that is utilized in EV batteries. The country’s EV growth plans face a lot of impediments such as lack of charging facilities, skyrocketing price of electric cars, and export restrictions of nickel that were unleashed by the government to incentivize FDI in nickel processing.