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Technology, regulation key to driving xEV adoption in IndonesiaJakarta Post, 3 Dec '19
Headlines 3 Dec 2019
- Vietnamese automakers ask for additional government support
- Vietnamese car market sees slowdowns at year-end
- Festive season upshifts two-wheeler sales in October
- Hyundai global sales down 2.8% to 392,247 units in November
- Inventory adjustment, slowdown dent two-wheeler November sales
- Kia India sells 14,005 units of Seltos in November 2019
Technological mastery and regulatory incentives were needed in Indonesia to drive consumer adoption of electrified vehicles (xEVs) and support President Joko "Jokowi" Widodo's commitment to turn the country into an xEV industry hub.
An associate partner of a research firm said that the current total cost of ownership (TCO) for xEVs in Indonesia was higher than the TCO for internal combustion engine (ICE) vehicles due to the government's fuel subsidy, which made electrified vehicles less competitive than ICE vehicles.
"Significant reduction in battery costs will drive down the ownership cost of xEVs and will make it more competitive against ICE [vehicles]," he said in a presentation at a seminar on xEVs in Jakarta.
"Regulatory support is instrumental to triggering xEV adoption in a country," he added, citing Norway as an example. Electrified vehicles made up 48.4 percent of all new cars sold in Norway in the first six months of 2019, up from 31.2% in the same period last year, according to a news agency.
Norway has taken several measures to boost xEV adoption, such as exempting battery-powered cars from the heavy taxes imposed on fossil fuel vehicles and offering discounted road tolls. Gupta said that other market drivers included consumer acceptance of the range and reliability of xEVs, as well as the availability of charging stations and vehicle supply.
"Indonesia is still in the early stages of xEV adoption, but could potentially become a sizeable market led by electric two-wheelers," he said. Indonesian Chamber of Commerce and Industry (Kadin) deputy industry chair Johnny Darmawan said that the country was not ready for 100% xEV adoption because of the relatively high cost of electric vehicle batteries (EVBs).
"The price of electric vehicles [EVs] in Indonesia is much higher compared to hybrid cars, [so] we need to solve the problems first," said Johnny, including battery prices.
"To lower the cost of EVBs, we would need a research and development programme and to develop the local [EVB] industry," he said. "Another important issue is that the batteries expire after 10 years of use, so we need a recycling program [for EVBs]."
As with Gupta, Johnny also believed it was more feasible that Indonesia would develop its electric motorcycle industry before its xEV industry. "Indonesia sells around six to seven million motorcycles each year. It would make sense for regulations to focus more on [electric] motorcycles, since production could provide batteries for up to 5 million [motorcycles] in three to four years," he noted.
Meanwhile, the Industry Ministry's director general for industrial resilience and international access, Doddy Rahadi, said that the country still had far to go before it could start producing vehicle batteries domestically.
"This is a gradual process. We are only at the stage of battery raw materials. We must first develop our knowledge in battery technology," he said.
Jokowi in August signed Presidential Regulation No. 55/2019 on electric vehicles, which stipulates fiscal incentives like exemptions on import duty and excise for xEVs, related technology and materials, as well as goods imported as part of EV investments.
The regulation also obligates EV manufacturers to comply with a minimum 35 percent local content requirement (TKDN) in 2019-2021, and 80 percent TKDN by 2030. Industry players are still awaiting the ministerial regulations that would implement the presidential regulation.
However, the World Bank has noted that Indonesia's complicated export procedures might harm its chances of becoming a global player in the xEV industry and instead isolate it from the global value chain.
"Exporting cars requires being part of integrated supply chains across multiple countries. Indonesia is largely cut off," reads a World Bank slide presentation to President Jokowi in September. The bank said Indonesia's relative isolation from the automotive global value chain was due to a series of nontariff measures that made importing capital goods difficult for carmakers.
The International Energy Agency (IEA), however, said that Indonesia's plan to develop an xEV industry largely made sense, as electric mobility was expanding rapidly. The IEA's Global EV Outlook 2019 report found that the global electric car fleet exceeded 5.1 million in 2018, almost doubling the number of new electric car sales from 2 million the previous year.
China remains the world's largest electric car market, followed by Europe and the United States, while Norway is the global leader in terms of EV market share. Separately, state-owned energy holding company PT Pertamina said it would support the government's vision by building an EVB factory.
"Pertamina supports the EV [policy] to reduce imported fuels and thus, the company will enter the battery production business," said Pertamina vice president for new and renewable energy Kristiadi Winarto.