Electric vehicles (EVs) have rapidly increased in popularity around the world, but they represent only 1.7% of current car sales in Indonesia.1 The Indonesian Government aims to rectify this situation with incentives for buyers, such as removing a luxury sales tax and lowering value-added taxes,2 issuing odd-even exempt numberplates for drivers, and inviting investment from foreign manufacturers.3 Both the Vietnamese EV company VinFast4 and China’s BYD1 have now committed to investing in Indonesia via the building of manufacturing plants. They join the Chinese automaker Chery, which unveiled their first completed EV manufactured in Indonesia in December of last year.5
Indonesia is the world’s largest producer of nickel, an element commonly used in EV batteries. By virtue of a deliberate policy requiring them, Indonesia is home to numerous smelting plants and has wholeheartedly embraced the concept of manufacturing electric vehicle batteries. Notably, whilst the nickel smelting plants are also used for the generation of stainless steel, that production has begun to wane as the focus has shifted to batteries, indicating Indonesia’s intent to develop an EV “ecosystem” and participate extensively in the EV industry.6
IMPLICATIONS:
The EV drive in Indonesia faces difficulties even before issues of limited supportive infrastructure are addressed. Indonesia currently stands at a precipice where it could gain significantly via the use of its nickel in batteries, or lose by just as much if alternatives to nickel are identified. The investment of VinFast and BYD will likely confirm one of these options, although EV giant Tesla has already begun using lithium-iron-phosphate (LFP) batteries.7 Moreover, 75% of EV cars sold in Indonesia in 2022 did not use a nickel battery, and instead ran on a cheaper iron-based product.2
Nevertheless, while nickel smelting plants are fraught with dangers and potentially unsafe work practices, they are a convenient source for companies like VinFast and BYD who intend to manufacture EVs in Indonesia. However, BYD currently uses LFP batteries, and would have to switch to nickel products, with VinFast presumably doing the same.1 Moreover, despite the proximity to nickel, Chery has refrained from using the element in its batteries, instead opting for LFP products.8 As such, while a successful EV industry and uptake can allow Indonesia to reduce growing oil imports, cut life-cycle emissions from transport and even decrease fuel subsidies in some cases, Indonesia’s nickel production and EV uptake face significant challenges ahead.2
[1] Damayanti, Ismi, (2024), “China’s BYD Debuts Passenger EVs in Indonesia,” Nikkei Asia. Retrieved: https://asia.nikkei.com/Business/Automobiles/China-s-BYD-debuts-passenger-EVs-in-Indonesia
[2] Adhiguna, Putra, (2023), “Indonesia’s Nickel Edge Yet to Show Up in its Electric Vehicles,” Institute for Energy Economics and Financial Analysis.” Retrieved: https://ieefa.org/resources/indonesias-nickel-edge-yet-show-its-electric-vehicles
[3] Souisa, Hellena, & Brooks, Sally, (2024), “How Indonesia Plans to Increase Electric Vehicle Uptake and Become a Regional Manufacturing Hub,” ABC News. Retrieved: https://www.abc.net.au/news/2024-01-15/how-indonesia-plans-to-increase-ev-uptake/103227192
[4] Hoang, Lien, (2024), “VinFast Expands EVs to Indonesia With Thumbs Up From Jokowi,” Nikkei Asia. Retrieved: https://asia.nikkei.com/Business/Automobiles/VinFast-expands-EVs-to-Indonesia-with-thumbs-up-from-Jokowi
[5] Xinhua, (2023), “Chinese Automaker Chery Produces 1st EV in Indonesia,” Xinhua. Retrieved: https://english.news.cn/20231202/12192308d36149ab93e66c191a720d60/c.html
[6] Maulia, Erwida, (2024), “Nickel Surplus Seen Widening in 2023 as Indonesian Output Soars,” Nikkei Asia. https://asia.nikkei.com/Spotlight/Market-Spotlight/Nickel-surplus-seen-widening-in-2023-as-Indonesian-output-soars
[7] MacFarland, Matt, (2022), “The Next Holy Grail for EVs: Batteries Free of Nickel and Cobalt,” CNN Business. https://edition.cnn.com/2022/06/01/cars/tesla-lfp-battery/index.html
[8] Katana, Satria, (2023), “This is the reason why Japanese & South Korean brands should be wary of the Chery OMODA 5 EV!” Autonet Magz. Retrieved: https://autonetmagz.com/inilah-alasan-brand-jepang-korsel-harus-waspada-pada-chery-omoda-5-ev/120748/
