2 Wheeler Electric Vehicle (EV) in Indonesia, EVolution or Bubble?
One of the hottest subjects in business has been electric vehicles (EV), particularly in densely populated nations that emphasize using one’s own means of transportation. Given that Indonesia is one of the world’s largest markets for two-wheel electric vehicles, I would like to examine the two-wheel EV industry in Indonesia in depth in this article.
However, is the ecosystem ready? What can we learn from other countries that have successfully transitioned their two-wheelers into EV? How competitive is the current market landscape? Have the big players joined in on the party? In this article, we are going to study how big the market is in Indonesia, and give a few suggestions on what we can do to accelerate this change, for a cleaner future.
For context, according to seasia.co, Indonesia is the world’s largest market for motorcycles and scooters, as evidenced by the 15 million motorcycles that are riding through the cities. According to an AISI survey, there are around 80 million bicycles in the country. Approximately 85% of families in Indonesia own at least one motorcycle.
The ambitious goal of 7.46 million electric vehicles (EV) set by Indonesia’s Ministry of Energy and Mineral Resources demonstrates Indonesia’s commitment to participating in global efforts to reduce greenhouse gas emissions.
Source : Ministry of Energy and Mineral Resources
Before diving deeper into Indonesia’s 2W market, we should look into the markets that have successfully created a high adoption rate for its EV, none other than India.
With 50% of EV out of total motorcycle sales in 2030, India aims to become the second largest country in terms of E2/3W vehicle producers. (For context, the government targets Indonesia’s EV/ICE penetration to reach 10% in 2023.)
How is India doing it? The key phrase is Government Support. India’s government has stated that they have an ambitious goal of 100% electrification by 2030. Source : Times
These words are put into concrete actions, some of them are :
- India rolled out the website e-AMRIT — https://www.e-amrit.niti.gov.in/ — at the COP26 Summit in Glasgow, which will function as a one-stop destination for all information on electric vehicles (charging facility locations and EV financing options as well as information about investment opportunities, government policies, and available subsidies for drivers and manufacturers)
- 100 percent foreign direct investment (FDI) is allowed in this sector under the automatic route.
- National Electric Mobility Mission Plan 2020
FAME phase II : subsidy per electric two wheeler (Indian made), linked to battery size, has been increased to $US204 per KWh from US$136.4 (1 KWh can take motorcycle up to 25 KM and electric car up to 7.5 KM
- Ministry of Power
Charging EVs is considered a service, which means operating EV charging stations will not require a license and commercial permit
Supported by the government, India has the biggest manufacturing for EV battery and E 2/3 Wheeler
And many other forms of support…..
So, how have Indonesia’s government support and other factors been? Here are some of the highlights from the past few years :
Not only that, here are a few incentives for EV buyers:
- Rp7–8mn Incentive for each new EV Motorcycle (for the first 200,000 units) and 7mn for conversion (effectively in place 20 March 2023)
- Zero value added tax (vs hybrid increased from 2%-12%)
- Zero down payment for financing EV purchase
and many others. (more relaxed credit evaluation, zero return duty rate in JKT,etc.)
The support is still far below the support India has given to its manufacturers and consumers, but the fast policy execution shows that Indonesia is serious about the 2030 target.
Auto OEMs have begun making EV investments
Automakers now want to replicate the success of ICE with their respective electric vehicles.
- Mar 2022 : Hyundai Motors (USD1.55bn), Toyota Motors (USD1.55bn), Mitsubishi Motors (USD0.7bn)
While the EV market is still nascent, the government is putting its weight behind the EV industry. In September 2022, President Joko Widodo signed a presidential decree that requires the central and regional authorities to use electric vehicles for official purposes. By 2030, the government is expected to purchase 2.45 million electric motorcycles.
Battery as the main cost driver and the current ecosystem landscape
According to our various interviews with EV startups, 80% of the current EV cost comes from acquiring the battery, since most of the batteries are imported from China. However, we see that various companies are putting their money into building a complete end-to-end ecosystem in Indonesia. Few are:
- LG Battery Consortium towards PT Industry Battery Indonesia (USD 9.8bn)
- Hyundai Consortium towards PT Industry Battery Indonesia (USD1.1bn)
- Foxconn towards PT Foxconn Indika Motors (USD1.1bn)
- Ningbo Contemporary Brunp Lygend Co. Towards PT ANTM & IBC (USD 1.1bn)
Not only that, various local companies are putting their focus on the battery ecosystem, namely Merdeka Copper Gold, Bakrie, Adaro Group, and other various energy conglomerate businesses.
Will new players or existing kings master the game?
It is not a secret that Honda and Yamaha produce more than 50% of Indonesia’s 2W vehicles. However, Honda and Yamaha both show that they are quite slow in rolling out EV production.
In March 2022, Honda announced its first production electric motorcycle, the CRF-E2, and will release ten new electric motorcycles by 2025
Honda aims to release ten new electric motorcycles by 2025, with annual sales of 3.5 mn units by 2030 (15% of total sales)
This is also the same for Yamaha, where they launched Yamaha E01 (still market testing in Indonesia)
Currently developing an electric scooter that could be on the roads within the next two to three years in India
Yamaha expect that 30% of two-three wheelers will switch to EV within 5 years
We identify that this could happen because of the high Capex business, which is the nature of the EV industry. The old players want to make sure that the market (policy, consumer, and government) is ready before they transition to it, thus limiting their downside.
So, EVolution or bubble?
So, it is safe to say that the government are throttling towards the change of 2 Wheeler from ICE to EV. This year (2023) will be one of the most vital, as in this early years, the regulations and investments into this sector should give us clarity on where this industry is going. But as of now, benchmarking from other successful countries, we can say that full penetration of 2W EV in Indonesia is inevitable.
