Indonesia's EV ambitions could help boost investments in the rest of Southeast Asia

Korean car producer Kia shows the electrical car “EV6 GT-Line” through the thirtieth Gaikindo Indonesia International Auto Show in Tangerang on August 10, 2023.

Yasuyoshi Chiba | Afp | Getty Images

Indonesia’s EV-friendly insurance policies have lured international traders to the nation, however consultants say they might additionally enhance investments in Southeast Asia’s automotive business extra broadly.

Indonesia might be the “gateway” to the remainder of the Association of Southeast Asian Nations, stated Anindya Novyan Bakrie, CEO and president director of Bakrie & Brothers, an Indonesian conglomerate whose electrical car unit VKTR manufactures electrical buses in addition to EV components.

The Southeast Asian nation is wealthy in copper, nickel, cobalt and bauxite — supplies important for the manufacturing of electrical car batteries. Indonesia is the most important nickel exporter, accounting for 22% of the world’s reserves, based on a report by the ASEAN Briefing.

Indonesia has courted the likes of Tesla within the hopes of spinning its useful resource riches into changing into a key international provide chain hub for electrical automobiles.

“Indonesia’s rich endowment in natural resources required for EVs underpins its attractiveness … and is certainly a pull factor for EV investments especially in the aftermath of a nickel ore ban and a government that is increasingly calling for the beneficiation of its natural resource to unlock economic growth,” Koketso Tsoai, cars analyst at BMI Fitch Solutions informed CNBC.

Indonesia has banned exports of sure metals and minerals in a bid to attract traders and producers in want of these supplies to its shores.

The nation’s objective to turn out to be a worldwide EV battery hub has seen vital help lately. Asian automakers like Toyota and Hyundai have made billion greenback investments to increase EV manufacturing amenities in Indonesia.

A 2022 ASEAN funding report famous that EV battery manufacturing made up a major share of overseas direct funding within the area between 2019 and 2021, particularly in Indonesia, Malaysia and Thailand.

Despite Indonesia’s efforts, the nation nonetheless faces hurdles in boosting car manufacturing.

“It will be tough for Indonesia to replace Thailand as a regional vehicle production hub, as the latter has a long-established export-oriented automotive industry. Indonesia will also face challenges from lower-cost producers like Vietnam and the Philippines,” stated Nishita Aggarwal, automotive analyst at EIU.

Still, the expansion of Indonesia’s EV sector might give a halo impact to its neighbors. By offering entry to the important thing supplies for EV batteries, the nation “could attract much more investment and … help ASEAN as a region adopt electric vehicles faster and more cheaply,” based on a report by Maybank.

Investing in ASEAN

Although Indonesia’s pure endowments play a serious function in constructing ASEAN’s aggressive EV ecosystem, Bakrie & Brothers counsel that traders are seemingly to take a look at the area as an entire.

The firm’s CEO stated that “producing the actual EVs in Indonesia, I think it is something that these companies will take a look at ASEAN as a region.” He believes that international locations can “combine forces” to herald totally different strengths and experience to profit the EV ecosystem of the area. 

EVs: We want to be part of the global supply chain, says Indonesian Chamber of Commerce and Industry

Malaysia, for instance, provides an “even more niche product mix of high-tech goods in an era of increasing digitalization in the automotive industry,” BMI’s Tsoai stated.

He famous that inside ASEAN, Indonesia will tackle an “outsized role in the upstream sector of the EV supply chain.” Nonetheless, Indonesia’s dominance on this space might complement the experience of different Southeast Asian international locations and enhance the area’s EV ecosystem as an entire.