Reviving Old Dreams
The government is once again unfurling an electric car program. It needs comprehensive and consistent policy to allow the old dream to not collapse.
THE government should not disregard the interest of many multinational companies of electric vehicles lately looking eagerly towards Indonesia. The transformation of the automotive industry from fuel-based to electric-based vehicles is an inevitability. Having the world’s largest nickel reserves, Indonesia has the basic capital to become a market leader in this field. The impact of this future automotive industry to our economy would obviously be significant.
The ambition is indeed nothing new. A similar program in a different form was launched by President Susilo Bambang Yudhoyono. At the time, the government planned to kick-off mass production of a national electric car in 2014. But because of inconsistent government policies, the plan never came to fruition, until now.
President Joko Widodo and his ministers would do good to learn some valuable lessons from that mistake. Moreover, there is a new investment certainty from LG Energy Solution Ltd, South Korea, which was formally announced last week. The ancillary company from the LG Group conglomerate is committed to invest capital amounting to a total of US$9.8 billion, or around Rp142 trillion, to establish an integrated lithium battery production centre here in Indonesia.
The electric car industry is gaining traction. Many manufacturers the world over is launching their electric car products. In Indonesia, Toyota this year plans to come abreast with Hyundai, who since 2019 began construction of a production facility worth over Rp20 trillion in Cikarang, West Java. The latest news is the government said it is waiting for a delegation from Tesla Inc, producer of electric cars in the United States, which claims it is interested in looking to invest a similar plant here.
The government’s blueprint to create an ecosystem for the electric car industry from upstream to downstream in Indonesia is on the right track. Since President Jokowi launched a program to accelerate the electric car program in August 2019, many inter-related policies have begun to be laid out. The target is production of a low carbon emission vehicle (LCEV) to reach 20 percent of a projected 2 million four-wheel vehicle units by 2025.
One of the keys to success of the acceleration lies in the upstream industry: a nickel reserve of 21 million tons, the largest in the world. This is the main raw material for batteries, the most vital component in electric vehicle production, that drew the interest of the LG Group and several other electric vehicle companies to enter Indonesia. To that end, the government has to ensure the nickel mine and smelter plants will operate safely and sustainably.
On the demand side, obviously Indonesia is a wide-open market for marketing of electric vehicles. The ratio of car ownership in Indonesia currently is only 99 units per 1,000 heads of population, far lower than several of our nearest neighbours.
The biggest challenge now is to ensure the business environment in Indonesia is healthy and amenable for development of electric vehicles. Generally, the biggest impediment to investing in Indonesia is policy inconsistencies. In the taxation department, for example, the government has yet to replace old regulations that do not provide enough incentives for sellers and buyers of electric vehicles.
The government also has another heavy task. The consumers have to be convinced that electric cars not only consume less fossil fuel, it also helps create a healthier environment. The issue is how would the government campaign the use of an environmentally friendly car if our very national electricity power policies have not budged from using coal, which is no less dangerous? Instead of pushing forward, it could well be the government that impedes progress of new and renewable energy yet again because of these inconsistent policies.