Indonesia Needs to Push for EV Localization to Lead ASEAN Market, Boost Economy, Analysts Said

TEMPO.CO, Jakarta - There is a critical need for Indonesia to localize its EV component production as the country is poised to become a leader in the electric vehicle (EV) industry within ASEAN, driven by strong local demand and regulatory support, analysts said. 

Akshay Prasad, a senior manager at global management consulting firm Arthur D. Little, told Tempo in a written statement, said that Indonesia's potential to not only lead in EV production but also to create substantial employment opportunities and drive economic diversification. 

He stressed that building a robust local supply chain could significantly lower production costs, improve component quality, and optimize delivery times. This effort aligns with the Indonesian government's ambitious plans to produce 600,000 units of domestic battery electric vehicles by 2030 and reduce air pollution by 29%.

Indonesia, one of the top 10 automotive markets globally, stands to gain significantly from the shift towards EVs. The transition presents substantial job creation potential across the entire value chain, from raw material processing to component manufacturing and vehicle assembly. 

Akshay Prasad will be delivering a keynote speech at the opening of the Automotive Electrical Indonesia Summit (AEIS) 2024 on July 25 in Jakarta. The topics to be discussed in the two-day summit include the latest management and policies related to EV technology, as well as its role in realizing sustainable transportation.

Prasad's presentation at AEIS 2024 outlined four key areas for localization: Battery and Related Components, Powertrain and Power Electronics, Connectivity and Control Systems, and Chassis and Body Parts.

With rich nickel and cobalt reserves, Indonesia is well-positioned in the battery components sector. However, Prasad noted that the country needs to enhance its capabilities in powertrain and electronics to fully capitalize on the EV revolution. He recommended implementing action-oriented policies, creating an EV consortium, establishing dedicated EV manufacturing zones, fostering local and international partnerships, and developing industry-led courses to equip the workforce with relevant skills.

Prasad said that by focusing on localizing key components and building a comprehensive EV ecosystem, Indonesia could create a thriving industry that benefits its economy and workforce while contributing to sustainable transportation solutions. The AEIS 2024 event fostered important discussions on Indonesia's future role in mobility and its potential leadership in ASEAN's EV production and adoption.

Recently, when inaugurating Freeport Indonesia’s copper smelter in East Java, Investment Minister/Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia said that the smelter is important in processing copper, a key component in the EV ecosystem. One of the downstream products is copper foil, which is used as raw material for EV battery wrappers, Antara reported. 

President Director of Freeport Indonesia, Tony Wenas, added that the smelter is expected to start operating in August, with a refining capacity of 3 million tons per year together with PT Smelting. The project's cumulative investment has reached Rp55 trillion or around US$3.67 billion. 

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