Roadblocks to Indonesia’s Electric Vehicle Ambitions

Yet, significant roadblocks remain. In 2018, a report published by corporate strategy consulting firm Solidiance listed three obstacles: unclear policies, the hefty price tag, and the wait-and-see strategies of both original equipment manufacturers and infrastructure players. The main challenge, however, is the still the limited access to EVs.

Prohibitive prices

Public access to EVs is still hampered by the high price of electric cars. No model is priced below Rp 250 million (US$17,351) – the average price of automobiles that is deemed affordable by the public. Even a more affordable model, the Nissan Kicks e-POWER, is priced at a staggering Rp 482 million (UD$32,154). For that price, one could purchase not one but two of the best-selling conventional car model in Indonesia, the Toyota Avanza. Pricing could get more competitive with the arrival of a compact EV from Chinese manufacturer Wuling Motors, which is set to cost from Rp 200 million to 300 million (US$13,400 to $21,000).

The cost of the battery accounts for 40 to 60 percent of the price of each electric vehicle. As manufacturers are still importing batteries, lowering the costs would be difficult. The only solution is to produce batteries domestically. To move towards that objective, the country has already established cooperative arrangements with three battery companies – Foxconn, CATL, and LG Chem, which has an alliance with state-owned Indonesia Battery Corporation (IBC).

Consumer preferences

Most of the EVs sold in the country are sport utility vehicles (SUVs), which are very popular in Indonesia. Despite their prevalence, the dominant preference of Indonesian consumers is for multi-purpose vehicles (MPVs), also called minivans or people carriers, due to the lower tax rate on them. As of 2019, tax rate imposed on the sales of MPVs was 10 percent – considerably lower than on other types of vehicles such as small-size sedans, which are taxed at 30 percent. Another reason behind Indonesia’s fondness for MPVs is their desire to spend time with family and for relatives to travel together.

To gain more potential buyers, automotive manufacturers could consider manufacturing electric MPVs. Toyota, for example, unveiled the Kijang Innova EV Concept at the Indonesia International Motor Show Hybrid 2022. The company is expected to produce the model locally.

Access and acceptance

Considering that attention to renewable energy is increasing and gas prices are rising, Indonesia has a great opportunity to develop its own EV ecosystem. When it comes to renewable energy, Indonesia has other options such as a biodiesel program. Should Indonesia stick to the EV route, however, the country would have to increase public access to EVs and EV infrastructure, thereby promoting public interest in and acceptance of electric mobility.

As EVs are still considered a niche option, there is an immediate need to educate the public on EVs and, if possible, introduce policies that push the public to move voluntarily from combustion to electric transportation. Public education about charging, maintenance and the difference between electric automobiles and combustion will be necessary. Such efforts should not be limited to the government but can also be carried out by vested parties such as auto show organizers, automotive journalists and automakers.