Powering its growth, the company is relying on its extensive nickel reserves and an aggressive downstreaming strategy to establish a comprehensive domestic EV and battery supply chain.
Despite government incentives and increasing sales, the country's electric vehicle goals are encountering several obstacles, including high costs, inadequate charging infrastructure, and the swift advancement of battery technology, which all pose a threat to progress.
With its sights set on the future, Jakarta aims to have 2 million electric cars and 12 million electric two-wheelers on its roads by the year 2030.
Our new platform featuring a collection of carefully selected content, including explanatory articles, frequently asked questions, in-depth analyses, and informative graphics, all provided by our team of accomplished experts.
To accomplish this, the government has implemented a series of policies in order to encourage citizens to adopt electric vehicles and entice foreign companies to establish a presence in the country.
Both GAC Acton and France's Citroen have already committed to constructing factories in the country.
Figures indicate that electric vehicles (EVs) are gaining traction in Indonesia. Although just 125 units were sold in 2020 at the peak of the pandemic, by 2023, this number had surged to 17,000, and last year it jumped to over 43,000 units, as per data from the automotive industry association Gaikindo.
Government subsidies have been "very helpful" for EV sales, Herman Tri Putra, a sales representative in Jakarta for Chinese EV heavyweight Neta Auto, said to This Week in Asia.
He noted that the annual tax benefits and the efficiency of using electric fuel make electric vehicles more cost-effective than conventional cars in the long run.
Despite a recent increase in sales, electric vehicles still only made up a small portion of the approximately 860,000 passenger cars sold in Indonesia last year. Experts caution that government incentives may not be enough to persuade potential buyers, who are still hesitant due to concerns about the limited range of EVs and their higher upfront prices.
Vehicles powered by internal-combustion engines are approximately 40 percent less expensive than similar electric models in Indonesia, whereas there has been relatively little advancement in building the necessary infrastructure to support the use of electric vehicles.
Outside major cities like Jakarta and Surabaya, the lack of charging stations discourages many drivers, according to Herman from Neta.
I believe the government will be able to achieve its target without much trouble, but it must be accompanied by the widespread development of charging stations across Indonesia.
Indonesia could rise to become one of the world's top three producers of both electric vehicles and batteries by 2027.
The validity of this assertion will depend on the country's ability to create a market demand for electric vehicles, according to Putra Adhiguna, managing director at the Energy Shift Institute think tank.
It is essential to develop domestic demand for electric vehicles in order to play a significant role in the global electric vehicle supply chain, particularly in the highly competitive market," he said. "Currently, Indonesia is mainly involved in the initial 20 percent of the electric vehicle supply chain.
Nickel galore
The country is counting on its proven nickel reserves and the government is hopeful that its control over this crucial commodity, traditionally used in EV battery production, will strategically position the nation to enhance its value-added manufacturing sector.
Indonesia's downstreaming strategy, which involved banning the export of unprocessed nickel ore, has attracted billions of dollars in investments, mainly from Chinese companies, such as steel manufacturers Tsingshan and battery manufacturer CATL.
Currently, Indonesia is the world's leading producer of nickel mining and smelting, accounting for nearly half of the world's refined nickel and two-thirds of its total mined nickel. In 2023, Indonesia's nickel exports, after processing, reached a value of US$22 billion, making up 9 per cent of its total exports, a significant increase from 2 per cent in 2019.
Last year, Indonesia achieved another significant milestone with the opening of its first electric vehicle battery factory: a US$1.1 billion facility jointly established by Korean companies Hyundai and LG.
The analyst, Putra, believes there is vast potential for growth, considering Indonesia is already the largest automobile market in Southeast Asia.
He warns against over-reliance on nickel, particularly as newer technologies, such as lithium ferro-phosphate batteries, gain popularity among manufacturers, including those in China. These alternatives do not require nickel, indicating a need for Indonesia to diversify its approach to EV production.
He noted that nickel provides some benefits, but its advantages are relatively minor, especially when compared to electric vehicles that use batteries without nickel.
More Articles from SCMP
Hong Kong family behind Vitasoy donates HK$100 million to CUHK art museum.
This article originally appeared on the South China Morning Post (www.scmp.com), the leading news source covering China and the Asia region.
Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.