Momentum of Electric Vehicle Development
The investment involves foreign investors (PMA) and domestic investors (PMDN) and is to be realized from December 2021 to early 2022.
Momentum refers to a situation in which one party’s initiative is enthusiastically welcomed by another party and becomes a widespread phenomenon. Perhaps this is called equilibrium in the language of economics, or the meeting of the supply side with the demand side. More recently, equilibrium has been related to sustainability issues. And because of that, electric cars, or battery electric vehicles (BEVs) have gained momentum.
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Last week, President Joko Widodo laid the cornerstone for an electric vehicle battery (EVB) factory owned by PT HKML Battery Indonesia, a consortium consisting of the Hyundai Motor Group, LG Energy Solution, and the Indonesia Battery Corporation (IBC), the latter of which is jointly owned by state-owned companies PT Indonesia Asahan Aluminum (Inalum), PT Aneka Tambang Tbk, PT Pertamina, and PT Perusahaan Listrik Negara (PLN).
The first EVB factory in Southeast Asia is to be built with a total investment of US$1.1 billion, or more than Rp 15 trillion. This investment is part of a larger investment commitment worth $8.7 billion, or more than Rp 120 trillion.
The investment involves foreign investors (PMA) and domestic investors (PMDN) and is to be realized from December 2021 to early 2022.
Hyundai Motor plans to start producing electric cars next year with an annual production capacity of between 150,000-250,000 vehicles.
The construction of the EVB factory will be a momentum for pushing the sustainable development of the national economy. The battery is the most important component of an electric vehicle, with the battery price contributing around 40 percent of the vehicle’s price. Therefore, the battery factory is the foundation for developing electric vehicles. Hyundai Motor plans to start producing electric cars next year with an annual production capacity of between 150,000-250,000 vehicles.
Momentum
Momentum is like a rolling snowball that grows bigger and bigger. The ecosystem of the electric vehicle industry will involve a large number of related industries ranging from raw materials, component producers and distributors to end users. The electric car industrial chain will employ many workers.
There are several reasons why Indonesia has the opportunity to become an important player in the global electric vehicle industrial chain. First, Indonesia has the key raw materials needed to produce batteries, such as nickel, cobalt, aluminum and manganese. Only lithium is still imported. About 80 percent of the raw materials for EVBs are available in the domestic market.
Second, the national regulations are also conducive for investing in and developing the electric vehicle industry. Job Creation Law No. 11/2020 makes it easier for investors to obtain licenses and funding
through the Investment Management Agency (LPI). Meanwhile, Government Regulation No. 74/2021 on the exemption of luxury goods sales tax (PPnBM) for BEVs will take effect in October this year. The regulation exempts all motorized vehicles using BEV or fuel cell electric vehicle (FCEV) technology from luxury goods sales tax.
Third, Indonesia, with its population of more than 240 million and a middle class of more than 40 million people, will become the largest electric vehicle market in Southeast Asia. In short, the electric vehicle industry ecosystem is quite promising.
With the enormous potential for developing the BEV industry ecosystem, there are a number of initiatives that need to be considered for the future. For example, it is necessary to synchronize regulations and policies so that they do not overlap. At least seven regulations are relevant to the electric vehicle industry. First is Government Regulation No. 73, 2019 on PPnBM imposition, which was revised as Government Regulation No. 74/2021 that excludes electric vehicles as luxury goods. Second is Presidential Regulation No. 55/2019 on the accelerated development of BEVs for road transportation.
Third is Energy and Mineral Resources Ministerial Regulation No. 13/2020 on the provision of electricity charging infrastructure for BEVs. Fourth is Transportation Ministerial Regulation No. 45/2020 on electricity-powered motorized vehicles. Fifth is Home Ministerial Regulation No. 8/2020 on the basic calculation for the imposition of motorized vehicle tax and motorized vehicle transfer fees. The other two are Industry Ministerial Regulation No. 27/2020 and No. 28/2020 on the road map for the development of battery-powered electric motorcycles. A good industrial ecosystem requires a solid regulatory ecosystem.
Policy consistency between one administration and the next, and coordination across ministries and agencies as well as with local governments is the key.
In order to support the increasing use of electric vehicles, the development of supporting infrastructure should be accelerated further, especially those related to the expansion of charging stations. However, price is the most important factor. With the advancement of electric battery technology and the development of supporting ecosystems, it is expected that electric vehicles will become more affordable for consumers. The momentum of EVB development that has already begun should be maintained so the industry will continue to grow. Policy consistency between one administration and the next, and coordination across ministries and agencies as well as with local governments is the key.
In principle, incentives and disincentives must be provided so the BEV industry is able to increase production capacity, supported by an increase in demand, especially domestic demand. In terms of disincentives, the carbon tax included in the draft law on General Provisions on Taxation must be elaborated as a commitment to achieve the carbon reduction target in the future. Now is the time for our economic policies to be based on a long-term vision, not just on pragmatism.
A. PRASETYANTOKO is the rector of Atma Jaya Catholic University of Indonesia.
(This article was translated by Hendarsyah Tarmizi).