EV in Indonesia – Execution is the Key

2 months ago . 4 min read
EV in Indonesia – Execution is the Key
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By Raj Kannan

Indonesia is rapidly becoming the citadel of Electric Vehicles (EV) in the Region. The media has been abuzz with news of leading car manufacturers like Hyundai and Toyota exploring to set up their EV factories in Java and, of course, the on-again-off-again news of Tesla setting up their EV battery facility locally.

While EV is not a new phenomenon, its exponential growth in the last decade is. EVs have been around since the mid-19th century, and in fact, until 1900, the land speed record was actually held by an EV. With the introduction of internal combustion engines for automobiles, EVs died out until their revival with the advent of modern lithium batteries. Plug-in hybrids EVs (PHEV) grew, followed by Battery EVs (BEV), which led to the introduction of battery swapping stations. By 2014, there were half a million plug-in EVs globally, growing to a million units two years later, and by the end of 2020, the combined sales of EVs (both PHEV and BEV) globally hit 10 million units, the majority of these were sold in China and Europe.

Within Indonesia, EV's rapid growth was boosted by a regulatory reform via a Presidential Decree in 2019. This decree, signed in August 2019, provided a series of incentives for manufacturers of EVs and the establishment of battery manufacturing, which is why Indonesia became a hot target for Tesla. The making of EV batteries requires 11 minerals and chemicals, including nickel, cobalt, and lithium. Indonesia produces 10 of these components, especially nickel and cobalt that it has in abundance, except for lithium, which it has to import. As a result, establishing a major battery manufacturing outfit in Indonesia makes commercial sense, and the recent government decision to ban the export of Nickel ore in unprocessed form supports such ventures.

However, similar to most countries, the biggest impediment to the growth of EVs in Indonesia is the infrastructure for charging these vehicles. That said, I am impressed by PLN hitting the ground running in establishing series of charging stations and introducing incentives to its customers to charge the EVs at home at night via a discount scheme. Pertamina, the leading oil and gas company and gas station owner, has also been mandated to support the growth of EVs in the country. Even the bus companies in Jakarta and Bali have embraced going electric wholeheartedly. Trans Jakarta, the city's government-owned operator of the bus service in Jakarta, has plans for 10,000 units of electric buses by 2030.

However, more needs to be done, particularly around adopting the latest technologies for vehicle charging. Some US and European cities are doing away with plug-in cables on safety issues. Instead, they use in-the-ground induction charging spaces in shopping centers, fast food drive-ins, shopping malls, etc. Thus, they enable EVs to be charged while waiting to pick up groceries.

We recently had the honor of sharing our regional and global expertise in EV with the country's leading EV proponents. At the leadership level, these companies have a clear aim to support and grow the ecosystem supporting the EV business. In some cases, they have started with collaborations between ride-hailing companies, taxi firms, and car manufacturers. But there is still considerable work to be done to expand this ecosystem to include the startups that are exploring battery swapping stations, aspiring local OEMs in EV components, the mining companies, the battery manufacturers, the EV investors, the fast-food outlets, the shopping malls, the public transport stations and of course the central and regional government policymakers in this rapidly growing sector.

In my experience, the right strategy is only the first step, the bigger and more important aspect is execution, and that is where I believe the local EV proponents need to focus on concurrently. I say concurrently because incremental improvements to achieve a new paradigm in a rapidly growing ecosystem seldom delivers positive outcomes. Best results are achieved when the entire business ecosystem for EV is understood, leveraged, and the myriad collaborations are executed concurrently.

I am hopeful we will get there.

Raj Kannan is a Partner and Executive Director at Deloitte Consulting South East Asia. Views expressed are personal and not reflective of or attributable to Deloitte or its related entities. Raj can be contacted at rajkannan@deloitte.com

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