Korean automobile manufacturer Kia displays the electrical vehicle “EV6 GT-Line” in the course of the thirtieth Gaikindo Indonesia International Auto Show in Tangerang on August 10, 2023.
Yasuyoshi Chiba | Afp | Getty Images
Indonesia’s EV-friendly policies have lured global investors to the country, but experts say they may also boost investments in Southeast Asia’s automotive industry more broadly.
Indonesia could possibly be the “gateway” to the remainder of the Association of Southeast Asian Nations, said Anindya Novyan Bakrie, CEO and president director of Bakrie & Brothers, an Indonesian conglomerate whose electric vehicle unit VKTR manufactures electric buses in addition to EV parts.
The Southeast Asian country is wealthy in copper, nickel, cobalt and bauxite — materials essential for the manufacturing of electrical vehicle batteries. Indonesia is the largest nickel exporter, accounting for 22% of the world’s reserves, in accordance with a report by the ASEAN Briefing.
Indonesia has courted the likes of Tesla within the hopes of spinning its resource riches into becoming a key global supply chain hub for electric vehicles.
“Indonesia’s wealthy endowment in natural resources required for EVs underpins its attractiveness … and is definitely a pull factor for EV investments especially within the aftermath of a nickel ore ban and a government that’s increasingly calling for the beneficiation of its natural resource to unlock economic growth,” Koketso Tsoai, automobiles analyst at BMI Fitch Solutions told CNBC.
Indonesia has banned exports of certain metals and minerals in a bid to attract investors and manufacturers in need of those materials to its shores.
The country’s goal to turn into a worldwide EV battery hub has seen significant support in recent times. Asian automakers like Toyota and Hyundai have made billion dollar investments to expand EV production facilities in Indonesia.
A 2022 ASEAN investment report noted that EV battery production made up a major share of foreign direct investment within the region between 2019 and 2021, especially in Indonesia, Malaysia and Thailand.
Despite Indonesia’s efforts, the country still faces hurdles in boosting vehicle production.
“It’ll be tough for Indonesia to interchange Thailand as a regional vehicle production hub, because the latter has a long-established export-oriented automotive industry. Indonesia may even face challenges from lower-cost producers like Vietnam and the Philippines,” said Nishita Aggarwal, automotive analyst at EIU.
Still, the expansion of Indonesia’s EV sector could give a halo effect to its neighbors. By providing access to the important thing materials for EV batteries, the country “could attract rather more investment and … help ASEAN as a region adopt electric vehicles faster and more cheaply,” in accordance with a report by Maybank.
Although Indonesia’s natural endowments play a serious role in constructing ASEAN’s competitive EV ecosystem, Bakrie & Brothers suggest that investors are likely to have a look at the region as an entire.
The corporate’s CEO said that “producing the actual EVs in Indonesia, I feel it’s something that these firms will take a have a look at ASEAN as a region.” He believes that countries can “mix forces” to bring in several strengths and expertise to learn the EV ecosystem of the region.
Malaysia, for instance, offers an “much more area of interest product mixture of high-tech goods in an era of accelerating digitalization within the automotive industry,” BMI’s Tsoai said.
He noted that inside ASEAN, Indonesia will tackle an “outsized role within the upstream sector of the EV supply chain.” Nonetheless, Indonesia’s dominance on this area could complement the expertise of other Southeast Asian countries and boost the region’s EV ecosystem as an entire.