Indonesia’s electric vehicle (EV) friendly policies have not only attracted global investors to the country but also hold the potential to boost investments in Southeast Asia’s automotive industry as a whole. According to Anindya Novyan Bakrie, CEO and President Director of Bakrie & Brothers, Indonesia could serve as the “gateway” to the rest of the Association of Southeast Asian Nations (ASEAN). The country’s abundance of key resources like copper, nickel, cobalt, and bauxite establishes its position as a significant manufacturing hub for EV batteries. As the largest nickel exporter globally with 22% of the world’s reserves, Indonesia has positioned itself to become a crucial player in the global supply chain for electric vehicles.
The Indonesian government’s ban on exports of certain metals and minerals has been instrumental in attracting investors and manufacturers in need of these materials to its shores. With the vision of becoming a global EV battery hub, Indonesia has garnered tremendous support in recent years. Asian automakers such as Toyota and Hyundai have made billion-dollar investments to expand EV production facilities within the country. The ASEAN investment report of 2022 highlighted that foreign direct investment in the region, particularly in Indonesia, Malaysia, and Thailand, was heavily skewed towards EV battery production between 2019 and 2021.
Despite Indonesia’s ambitious efforts, it faces challenges in ramping up vehicle production and becoming the dominant regional production hub. Nishita Aggarwal, an automotive analyst at EIU, believes that replacing Thailand as a regional vehicle production hub will be difficult for Indonesia, considering Thailand’s well-established export-oriented automotive industry. Additionally, lower-cost producers like Vietnam and the Philippines pose competition. However, the growth of Indonesia’s EV sector could have a halo effect on its neighboring countries, driving the adoption of electric vehicles at a faster rate and lower cost in the ASEAN region as a whole.
While Indonesia’s rich natural resources play a crucial role in building ASEAN’s competitive EV ecosystem, experts suggest that investors are likely to consider the region as a whole. Bakrie & Brothers state that producing actual EVs in Indonesia would prompt companies to examine ASEAN as a region. By combining forces, countries within ASEAN can leverage their different strengths and expertise to benefit the EV ecosystem of the region. For instance, Malaysia offers a unique mix of high-tech goods in the automotive industry, particularly in the era of increasing digitization. Indonesia, on the other hand, is expected to take on an outsized role in the upstream sector of the EV supply chain. The complementarity and collaboration between Southeast Asian countries could accelerate the development of the region’s EV ecosystem.
With Indonesia at the forefront of EV-friendly policies and its vast reserves of key resources, the ASEAN automotive industry is poised for growth and innovation. The country’s efforts to become a global EV battery hub have generated significant interest and investment. While challenges remain, Indonesia’s progress in the EV sector is not only beneficial for its own economy but also has the potential to catalyze the growth of electric vehicles throughout the ASEAN region. The collaboration and cooperation among Southeast Asian countries could create a dynamic and competitive ecosystem, positioning ASEAN as a prominent player in the global EV industry. As the demand for EVs continues to rise, Indonesia’s strategic advantages and its efforts to attract investments lay a strong foundation for the development of a sustainable and prosperous EV industry in Southeast Asia.