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Indonesia Set to Build a New EV Battery Plant

Image credit: www.reuters.com

Indonesia Battery Corp. and a consortium led by a South Korea-based company are set to build a USD 1.2 billion electric vehicle battery plant, the Indonesian investment minister said via news reports.

The facility will be constructed in the Kota Deltamas industrial area in Bekasi, West Java Province, about a two-hour drive from Jakarta. The site is near where another South Korean company is nearing the completion of its first manufacturing plant in Indonesia.

Indonesia, the world’s largest nickel producer, is keen to tap its large reserves of the essential electric vehicle battery component to build a domestic EV battery industry. Officials have said they want the country’s production to reach a battery capacity of 140 gigawatt-hours by 2030 and are aiming for Southeast Asia’s largest economy to develop a domestic industry and market for electric vehicles—mainly motorbikes rather than cars. The facility is expected to have a production capacity of 10 GWh—one gigawatt equals 1 billion watts of electric power.

After a long process, the agency is thankful that they can soon break ground on the facility, said Investment Minister and BKPM chief Bahlil Lahadalia. The partnership, besides creating jobs, is projected to help Indonesia upgrade from being a producer and exporter of raw commodities to becoming an important player in the global supply chain for the electric vehicle battery industry.

The Minister, however, stopped short of saying exactly when construction will begin. After signing agreements on April 29, the Ministry and the South Korea-based company are currently focusing on completing a joint study and working out some details for what will be Indonesia’s first EV battery plant, the Ministry said. It added the facility will span 33 hectares and employ 1,000 workers, part of an estimated USD 9.8 billion in total investment for the battery project.

As reported by OpenGov Asia, Indonesia plans to roll out new regulations that offer tax breaks for hybrid EVs, in the latest effort to promote the development of electric vehicles in the country. In a meeting with Parliament, Indonesian Finance Minister Sri Mulyani said that investors who build electric cars in Indonesia feel that the current framework is unfair as there is no difference in the tax rates between hybrid and fully electric cars.

While battery-powered EVs continue to be exempted from the luxury tax, the plug-in hybrid EV will see an increase to 5% from 0%. Full and mild hybrid types will be taxed at a rate of 6% to 12%, from a previous range of 2% to 12%. Also, the government will provide tax holiday incentives for up to 10 years if EV manufacturers make at least USD 346.2 million investment in the country.

The new tax scheme reflects the government’s efforts in boosting investment for battery-powered EVs, said researchers from a tax consulting firm. More investment will make Indonesia a centre of manufacturing and it will have a multiplier effect on the economy, with the creation of employment, the emergence of new industries in the EV ecosystem, and expansion of the tax base. It also encourages adoption among consumers, nudging them from hybrids to EVs.

Tech companies have also expressed their commitment to the initiative. An international ride-hailing giant put over 5,000 electric cars, motorcycles, bicycles, and scooters across Indonesia. Meanwhile, another tech unicorn is planning to test electric motorcycles this year and is working with the state-owned gas and oil company for the commercial pilot in Greater Jakarta.

However, it will not be easy to make consumers switch on a large scale due to its high price, said the association of Indonesian automotive industries. Most consumers are buying cars at prices between USD 10,386 to USD 17,310, while electric cars are currently selling for about USD 34,620. According to the Association, there is a huge potential for electric cars, but prices must be lowered significantly so they will be more affordable for the wider communities.

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