Korean automobile manufacturer Kia displays the electric vehicle “EV6 GT-Line” during the 30th Gaikindo Indonesia International Auto Show in Tangerang on August 10, 2023.
Yasuyoshi Chiba | Afp | Getty Images
Indonesia’s EV-friendly policies have attracted global investors to the country, and experts suggest they could also drive investments in Southeast Asia’s automotive industry as a whole.
According to Anindya Novyan Bakrie, CEO and President Director of Bakrie & Brothers, an Indonesian conglomerate with an electric vehicle unit called VKTR, Indonesia could serve as the “gateway” to the rest of the Association of Southeast Asian Nations.
Indonesia is abundantly rich in copper, nickel, cobalt, and bauxite, which are crucial materials for manufacturing electric vehicle batteries. It is the largest exporter of nickel, accounting for 22% of the world’s reserves, as per the ASEAN Briefing report.
The country has actively courted companies like Tesla in its quest to become a major global supply chain hub for electric vehicles. Koketso Tsoai, an automobile analyst at BMI Fitch Solutions, believes that Indonesia’s natural resource wealth is an attractive factor for EV investments, given its ore ban and the government’s focus on resource beneficiation for economic growth.
Indonesia has implemented export bans on certain metals and minerals to encourage investors and manufacturers to set up in the country.
Indonesia’s ambition to become a global EV battery hub has garnered significant support in recent years. Automakers like Toyota and Hyundai have made billion-dollar investments in expanding EV production facilities in Indonesia.
A 2022 ASEAN investment report highlights that EV battery production accounted for a significant portion of foreign direct investment in the region from 2019 to 2021, especially in Indonesia, Malaysia, and Thailand.
However, Indonesia still faces challenges in boosting its vehicle production. Nishita Aggarwal, an automotive analyst at EIU, believes that replacing Thailand as the regional vehicle production hub will be challenging due to Thailand’s established export-oriented automotive industry. Indonesia will also face competition from low-cost producers like Vietnam and the Philippines.
Nonetheless, Indonesia’s EV sector growth could have a positive influence on neighboring countries. By providing access to key materials for EV batteries, the country has the potential to attract more investment and accelerate the adoption of electric vehicles in the ASEAN region, according to a report by Maybank.
Investing in ASEAN
While Indonesia’s natural resources play a significant role in developing ASEAN’s competitive EV ecosystem, Bakrie & Brothers suggest that investors should consider the region as a whole.
The CEO believes that companies will look at ASEAN as a region when it comes to actually producing EVs in Indonesia. By combining their strengths and expertise, countries in the region can work together to benefit the EV ecosystem.
Malaysia, for example, offers a unique mix of high-tech goods in the automotive industry, which aligns with the increasing digitalization trend. Tsoai suggests that Indonesia will have a prominent role in the upstream sector of the EV supply chain in ASEAN. Collaborating with other Southeast Asian countries can strengthen the region’s EV ecosystem.
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