Indonesia to give shot in arm to electric-car sector

Visitors checking out an electric car by French firm Renault at a trade show in Indonesia's Banten province last month. According to a draft Indonesian government strategy, under new rules, electric-car makers will have to gradually increase the amou
Visitors checking out an electric car by French firm Renault at a trade show in Indonesia's Banten province last month. According to a draft Indonesian government strategy, under new rules, electric-car makers will have to gradually increase the amount of locally produced parts to 80 per cent by 2030. PHOTO: AGENCE FRANCE-PRESSE

It will roll out incentives such as lower taxes as it aims to be S-E Asia hub for such vehicles

JAKARTA • Indonesia is planning a slew of incentives for electric-car manufacturers and drivers as it vies with nearby Singapore and Thailand to become the dominant force in South-east Asia for the sector.

The move is part of an effort to fortify the local economy and reduce reliance on imported oil. Indonesia, one of the largest untapped markets for electric vehicles (EVs), wants EVs to constitute a quarter of its car production by 2030 as it tries to bring in more global companies.

It has already lured investment from Toyota Motor Corp and SoftBank Group Corp, according to a draft government strategy seen by Bloomberg.

The incentives are aimed at accelerating the adoption of battery-powered cars in Indonesia and building a base for the production and export of such vehicles.

They include lower taxes for manufacturers and buyers of electric cars, and benefits for EV owners such as special parking areas, the draft that is awaiting only the President's approval shows.

"This regulation is the largest overhaul of the Indonesian automotive industry and it is an ambitious as well as a brave move by the government," said Mr Jeffrosenberg Tan, head of investment strategy at PT Sinarmas Sekuritas. "We hope this will lead to huge investments in EV infrastructure and will be followed through by the development of the supply chain ecosystem."

AMBITIOUS, BRAVE MOVE

This regulation is the largest overhaul of the Indonesian automotive industry and it is an ambitious as well as a brave move by the government. We hope this will lead to huge investments in EV infrastructure and will be followed through by the development of the supply chain ecosystem.

MR JEFFROSENBERG TAN, head of investment strategy at PT Sinarmas Sekuritas, on Jakarta's latest incentives.

President Joko Widodo said in a statement on Thursday that he will "surely" sign the decree once he receives it, without elaborating on the specifics of the new rules.

"We can go ahead and prepare the infrastructure to support electric vehicles," he said.

The rules would change taxation of vehicles so they would be levied based on fuel consumption and carbon emissions instead of body type and engine size, favouring electrified vehicles.

Under current rules, a US$65,000 (S$89,000) BMW X3 sDrive sport utility vehicle carries a lower luxury tax rate than a US$58,000 hybrid-powered Toyota Camry because sedans have been considered a more luxurious car type.

The new rules will also require electric-car makers to gradually increase the amount of locally produced parts to 80 per cent by 2030, according to the draft.

Producers of electric motorcycles would need to meet that requirement already in 2026.

A number of global carmakers have committed billions of dollars in investments even before the new rules have kicked in. Toyota, which has the biggest market share in Indonesia, has said it plans to spend US$2 billion to build hybrid-vehicle plants in the country.

Demand for such vehicles is rising in Indonesia, according to Mr Anton Jimmi Suwandy, a marketing director at Toyota's local unit.

Hyundai Motor is set to build two plants, including an EV unit, in Indonesia by investing US$1 billion, according to Indonesian Coordinating Minister for Maritime Affairs Luhut Pandjaitan.

SoftBank said this week that it will invest US$2 billion in Indonesia through ride-hailing giant Grab over the next five years and plans to explore investment opportunities in the country's EV, battery and renewable energy sectors.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 03, 2019, with the headline 'Indonesia to give shot in arm to electric-car sector'. Print Edition | Subscribe