Develop an ecosystem of electric vehicles in Indonesia; Integration of upstream and downstream sectors

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In the coming decades (barring unforeseen circumstances), various countries will ban the sale of new fossil-fuel vehicles, leaving no choice but the electric car or motorcycle. Norway could become the first country to impose this ban (expected entry into force in 2025) followed by various other European countries (Belgium, Denmark, Sweden, Iceland and the Netherlands in 2030).

In Asia, Singapore is set to become the first country to impose a ban on the sale of new fossil-fuel vehicles (with its full ban set for 2030), followed by China, Japan, Thailand and South Korea. in 2035. Indonesia, however, will need more time to make this transition. Initially, government officials mentioned 2040 as the target year for the ban. More recently, although a full ban appears to have been postponed until 2050 (based on a statement by the Minister of Energy and Mineral Resources, Arifin Tasrif, in local media). We assume that the country will see a gradual transition, starting with a ban on fossil motorcycle sales (around 2040) before a ban on fossil car sales comes into effect (2050).

It should indeed come as no surprise to see a gradual transition because – so far – most of the Indonesian government’s renewable energy targets have not been met because this transition is not only complex but also risky (because renewable energy sources remain less efficient and less stable – and therefore more expensive – than their fossil counterparts, and so it can actually deepen poverty if imposed too forcefully and too quickly in a country where poverty remains a big problem).

Indonesia Automotive Industry

Over the past decade or so, Indonesian government officials have said they aim to make Indonesia the manufacturing hub of Southeast Asia’s cars and motorcycles by 2030 (surpassing the main automotive force in the region, Thailand), mainly via the influx of foreign investment.

But then the electric vehicle arrived on the scene. And therefore, the focus needs to shift to fostering an EV ecosystem (including tax incentives) that allows existing business owners and consumers to adapt, while attracting new investors to Indonesia who will focus on the development of industries in both upstream and downstream sectors of the electric vehicle industry.

First, let’s get back to basics. Why is Indonesia an interesting place for manufacturing purposes and as a market to sell cars and motorcycles?

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