By Dr. Emi Gui, Senior Project Manager; and Farraz Theda, intern.

Despite ambitious targets and financial incentives, what an electric-vehicle dominated transport sector could look like for Indonesia is not well understood. Our team explores how consumer behaviour and government policies and measures may shape its electric vehicles market.

As part of our work on the Indonesian Electricity Roadmap project, our growing Jakarta-based team (established in 2019) have determined that electric vehicles (EVs) are an important component of Indonesia’s low-carbon energy transition. But, in order for Indonesia to meet these ambitious targets, it needs the right ecosystem of consumer buy-in, policy support, and infrastructure build-up. The types of EVs that are adopted will also influence the country’s ambition to become a dominant regional – and even global – EV and battery player.

Ambitious targets for electric vehicles in Indonesia

The Indonesian government has set a goal for EVs to make up 20 per cent of all domestic cars manufactured, equal to around 400,000 e-cars, by 2025. With motorbikes favoured over cars nationally, the government also aims to have e-motorbikes make up 20 per cent of the total domestic motorbikes production. According to the Ministry of Industry, there are 15 domestic e-motorbike manufacturers with a production capacity of up to 877,000 e-motorbikes annually. 

These ambitious targets for EV production have advantages: reducing dependency on oil imports and supporting a promising battery manufacturing industry. Both are likely to help improve Indonesia’s fiscal position and socio-economic development. 

Consumer concerns impeding EV uptake in Indonesia 

Consumer concerns over upfront costs, convenience, and functionality are some of the biggest barriers to EV adoption in Indonesia. 

High upfront costs for e-cars are preventing nation-wide adoption, despite generous incentives from government. The lowest price for an e-car is more than twice the price of most internal combustion engine (ICE) cars – even with incentives that can reduce upfront costs by 40 per cent  – making EVs uncompetitive. Major buyers of e-cars are currently limited to big companies or institutions with financial resources and sustainability strategies, rather than of households or individuals. In Australia, purchases of e-cars for fleets may bolster the transition to EVs, as these vehicles are usually sold into the second hand market a few years later. 

For e-motorbikes, it is functionality that concerns consumers. The price range for an e-motorbike is relatively close to the standard combustion motorbike, but uncertainties in the vehicle’s endurance have made customers reluctant to purchase. Lack of awareness of how e-motorbikes work, and low availability, also impacts sales. 

Limited supporting infrastructure is preventing uptake of both e-cars and e-motorbikes, outside of Java and Bali. The state-owned electricity enterprise PLN has installed 57 charging stations, centralised in 35 locations across Java-Bali to date. Domestic e-motorbike company, Gesits, has indicated that sales outside these regions accounts for less than 10 per cent of total units purchased – around 100 motorbikes. Increasing access to supporting infrastructure remains a crucial task for the government. 

Why are hybrids winning the race?

Despite – or perhaps because of – these barriers, there is a noticeable market preference amongst the types of EVs.

Image: There are three main types of electric vehicles, using different combinations of energy sources – hybrid electric vehicles, plug-in hybrids, and full electric vehicles (using a battery). Source: Climateworks Australia

Currently, hybrids are far more common in Indonesia than plug-in hybrids and full electric vehicles. According to the Indonesian automotive association GAIKINDO, 685 hybrids and 20 plug-in hybrids were sold in 2019. In 2020, hybrids topped the e-cars market again and only six plug-in hybrids were sold. The popularity of hybrids is not surprising – their ability to combine electricity and fuel combustion eliminates reliance on limited charging stations in Indonesia. They are also more affordable.

Is Indonesia heading towards its first tipping point?

Until full electric vehicles reach a point of mass adoption, hybrids and e-motorbikes are set to dominate Indonesia’s EV markets for the next few years. But could this be a trigger for Indonesia transitioning to an electric vehicle-dominated transport sector? 

The Climateworks team used recent research from the University of Exeter’s Global System Institute to analyse Indonesia’s light transport sector, identifying ‘tipping points’ – triggers needed to create large, irreversible change. Their analysis shows cost parity of hybrids and e-motorbikes with internal combustion engine vehicles could be the first tipping point – which the nation is already on the way to achieving. But there are many other measures needed for the country to continue on this path, especially if it is to meet its targets. 

Creating favourable conditions to scale up full-electric vehicle adoption

If Indonesia’s ambition to become a global manufacturing powerhouse for EV batteries is to be realised, uptake of EVs in general will need to increase, but in particular full electric vehicles. Widespread adoption will likely be determined by the level of policy support and overall market development. 

Disincentivising the use of petrol vehicles is crucial to promote growth of EVs. Tightening of vehicle emission standards, fuel excise duty, or economy-wide carbon prices are all measures that would limit ICE vehicle use in Indonesia. National policies are currently limited, but some regional governments have shown interest. For example, the Bali government released Regulation No. 48/2019 to support EV adoption on the island, containing a strategy to limit petrol vehicle access to tourism sites and parking areas.

Mass production will significantly reduce the upfront cost of EVs. Prices are expected to become more competitive over the years as Indonesia ramps up its domestic EV and battery production. The Indonesian government has announced a number of policy measures in the last couple of years to support its EV manufacturing expansion plan. These measures  include an export ban for nickel ore to preserve the precious metal for the domestic battery industry, developing a circular model to boost resource utilisation and reduce waste, and luring a number of international EV heavyweights to invest in the country. 

Electric vehicle uptake is closely coupled with Indonesia’s economic development and energy sector strategy. The state-owned electricity enterprise, PLN, has been actively supporting EV adoption. It recently signed a cooperation agreement with three EV auto companies and a ride-hailing company, to provide easy access for EV owners and operators. PLN is also deploying hundreds of EV charging stations through its electricity network. 

On the right track – but still a long way to go

The Indonesian government can draw confidence from what is already working, supporting the use of hybrids and e-motorbikes as the entry point of EV mass adoption. 

Further action could include supporting the implementation of fiscal and non-fiscal incentives that would attract early EV adopters, and maintain enthusiasm. Limiting the use of ICE vehicles and accelerating the growth of renewables will also push EV development further by creating an enabling environment.

In the long-term, advanced development of EV and battery would further reduce the cost, making EV more competitive in the market and driving the uptake of full electric vehicles. 

Interested in electric vehicles? See more of our work from this area.