Electric vehicle (electric vehicle/EV) increasingly popular in the world automotive industry, Indonesia is no exception. The Indonesian government is leaving no stone unturned to drive the growth of the country's electric vehicle sector by opening up new investment options for companies from around the world.
Reported by entrepreneur, Foreign EV companies interested in setting up in Indonesia can now benefit from more relaxation after President Joko Widodo introduced a new Presidential Regulation 55/2019 to accelerate the implementation of EVs for public transportation. Here are four reasons why foreign investors should consider investing in this sector, among them namely:
1. Abundant natural resources
When it comes to producing electric car batteries, nickel is considered an important component. Indonesia has one of the largest nickel reserves in the world. A quarter of the world's nickel reserves are found in Indonesia. In the year of 2020, Indonesia produces 760.000 ton nickel, with total 21 million metric tons of domestic nickel reserves. Besides that, besides having the largest gold reserves, The Grasberg mine in Indonesia also has the second largest copper reserves in the world, which is very important for building EV batteries.
2. Indonesia's EV roadmap
With a road map worth $17 billion, Indonesia has ambitious plans to become a significant participant in the global electric vehicle industry. In the year of 2025, the goal is to own 2,1 million electric motorbikes and 400.000 electric vehicles on the road, with 20% of which are produced locally. One of the goals is to create a fleet of electric buses in less than seven years for Jakarta's metropolitan mass public transport system. Especially, needed 14.000 electric buses to achieve that goal.
Besides that, PLN, state-owned electricity company, has committed to installing more than 31.000 additional EV charging stations in the year 2030. To fulfill this commitment is worth $3,7 billion over 10 year, PLN has made it available to the commercial and public sectors to invest in Indonesia. Besides that, several government initiatives are underway to expand electric vehicle capabilities. This bodes well for companies involved in electric vehicle development. As a result of the government's active participation in the Indonesian EV industry, investors seem to feel protected.
At the end of July, South Korean giant, Hyundai and LG, have signed a Memorandum of Understanding (MoU) with the Indonesian government to combine a joint venture focused on EV battery production in Karawang, West Java. Investment company $ 1,1 billion it aims to produce more than 150.000 batteries for EVs every year.
3. Indonesia's EV market is still growing
Indonesia's EV sector is still in its infancy, of which electric vehicles only represent 0,2% of annual vehicle sales on 2019. However, in September 2020, The University of Indonesia found that more than 70% Indonesian people are interested in owning electric vehicles, citing environmental concerns as the main reason, shows that Indonesian people are more aware of EVs.
McKinsey also projects that Indonesia's EV sales will increase significantly in the coming years. In the year of 2030 Domestic sales of electric passenger cars are expected to reach 250.000 unit, or 16% of all new passenger car sales, while demand for electric motorbikes is estimated to reach 1,9 million units, represent 30% of all two-wheeled vehicle sales.
As home to more than 22% world nickel reserves, coupled with government initiatives to reduce emissions by 29% over the next decade, This country has created an ideal climate for EV manufacturers to invest in Indonesia.
4. Government-backed incentives in Indonesia's EV sector
According to the government's latest Positive Investment List, The Indonesian EV industry is included in the priority sector in Indonesia. Benefits such as business ownership 100% and various tax incentives act as a catalyst in attracting investors worldwide. For example, EV business with capital investment above Rp 500 billion will get a reduction 100% corporate income tax, while investment worth Rp 100-500 billion will receive a reduction in corporate income tax 50%.
The culmination of all these factors has set the stage for foreign investors to invest in Indonesia's burgeoning EV market.
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