Article Written by Bergman Siahaan
The increasing interest in electric vehicles (EVs) in the world opens up great investment opportunities. The EV-Volumes website says that worldwide sales of EVs in 2022 reach around 10.5 million units. This number is 55% more than sales in 2021.
In Indonesia, the Association of Motor Vehicle Industries (Gaikindo) records 15,437 EV units sold throughout 2022. These sales have also increased from 2021, which were only 3,193 units. The EVs consist of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs).
The increase in EV sales is in line with the commitment of world leaders to reduce environmental damage, one of which is by using new renewable energy. One of the agreements at the world climate conference, COP26, is to reduce carbon emissions significantly by 2030 and net zero carbon by 2050.
To realize a clean earth from carbon emissions, switching to electric vehicles is the main way. Conventional vehicles, including aeroplanes, use fuel oil and gas to produce large carbon emissions. Most of the emissions produced by vehicles are carbon dioxide, but some also produce methane and nitrous oxide.
The EV industry creates a business chain, from raw materials production, and vehicle unit manufacturing including its technology, charging stations, to spare parts. EV production requires materials such as semiconductor chips, light detection and ranging sensors, and batteries.
These components are supply chains that are produced by other parties, outside EV assembly factories. For instance, Panasonic, produces rechargeable batteries, cars, avionic systems, and business systems.
Denso develops various auto parts, including gasoline and diesel engine components, hybrid vehicle components, climate control systems, instrument clusters, airbag systems, pre-crash radar systems, and spark plugs.
Amara Raja, is a specialist in the battery business, infrastructure sector, power system production, packaged foods and beverages, electronics products manufacturing, and fabrication of sheet metal products and fasteners. Then CATL, which is the largest lithium battery producer in the world.
Batteries are a key component of EVs. EV batteries account for up to 50% of the price of the vehicle. Battery supply is a big challenge for the EV industry. The main materials for making batteries nickel, cobalt, lithium, graphite and copper are.
These raw materials are produced from the regions of South Africa, South America, Australia and Indonesia. Currently, the majority of raw materials are processed in China and then sent to various EV factories.
The rapid increase in EV demand will lead to increased capacity throughout the EV value chain. The market for battery cells will grow by more than 20 percent annually until 2030, reaching at least $360 billion globally.
Indonesia has a huge investment opportunity related to EVs. Indonesia has nickel and cobalt natural resources which are the main components of batteries. The World Atlas places Indonesia as the world’s largest nickel producer.
According to the US Geological Survey (USGS), 48% of nickel production is in Indonesia. If world nickel production in 2022 is around 3.3 million metric tons, then production in Indonesia could reach 1.6 million metric tons.
According to the Indonesian Ministry of Energy and Mineral Resources, Indonesia’s nickel resources reach 17.68 billion tons and reserves of 5.2 billion tons. Most of the nickel reserves are located in Southeast Sulawesi, Central Sulawesi and North Maluku.
The Indonesian government then limited the export of raw materials, in turn, encouraging the growth of downstream industries. Therefore, battery factories, spare parts and EV assembly have become prospective business opportunities in the country. Here are some business opportunities in the EV industry:
Indonesia has a great opportunity as an EV producer given its large nickel and cobalt resources. With the government implementing raw material export restrictions and at the same time incentives for investment in the EV industry, EV manufacturers will have more margin if they open their factories in Indonesia.
2. Charging point
The addition of EVs requires more charging points such as gas stations for oil-fueled cars. The construction of this charging point can be seen from two sides. The first side is to build charging points at existing business unit locations such as cafes or supermarkets. On the second side, the existing charging point opens opportunities for complementary businesses such as cafes, minimarkets, or other service businesses in the location.
3. Servicing stations and spare part distributors
Just like other motorized vehicles, EVs require many service stations for maintenance and selling spare parts. Even charging points also require maintenance and replacement of some spare parts. Servicing stations are closely related to spare part distributors’ opportunities.
4. Battery refurbishment
Battery recycling is one of the fastest-growing businesses in the EV industry. This production is an attractive option for EV users because of its lower price. At the same time, the recycling business’s profit margin is relatively large.
5. Power banks
The power bank is also an attractive business opportunity. Like other electronic devices, battery energy reserves are also needed by EVs in certain circumstances, such as long trips. The power bank is a popular choice because of its portable use.
6. Third-party manufacturing
Technological innovation in EV spare parts and accessories will develop along with the increase in EV usage. Apart from being innovative and unique, goods produced by third parties are usually affordable. This price and uniqueness factor is very demand in the Indonesian market.
For EV marketing, Java and Sumatra are the main markets. Despite the fact of population size, the modern cities are in Java and Sumatra. Dense cities with high levels of economy are the best markets for EVs.
Jakarta, Surabaya, Bandung, Bekasi, Depok and Tangerang are cities on the island of Java with a population of over 2 million people. While in Sumatra there is Medan then Palembang which are inhabited by more than 1.5 million people each.
ION Mobility, a Singapore-based electric motorcycle manufacturer, has set its investment in Cikarang, West Java, in 2023. The factory in Cikarang will produce battery packs while assembling will be in collaboration with TVSM Indo at their factory in Karawang, West Java.
Indonesia has also offered investment prospects to Tesla and battery manufacturers Foxconn and Britishvolt. Companies that decided to invest in Indonesia include LG, US$8.9 billion and CATL, US$5.2 billion.
Large markets and sources of raw materials are Indonesia’s advantages in becoming an important player in the EV industry. In addition, government support through appropriate policies will increase competitiveness in attracting investment.
Influence of Government Policies
The Indonesian government has stated its commitment to encouraging vehicles’ shift to EVs. The President has issued Instruction Number 7 of 2022 which requires central government agencies and local governments to adopt battery electric vehicles (BEV) as official operational service vehicles or individual vehicles.
The Indonesian government provides EV tax deductions through the Minister of Home Affairs Regulation Number 1 of 2021. The owner only needs to pay 10% of the actual tax (2% of the vehicle price).
Currently, the government is analysing subsidies for battery-based EV (BEV) value-added taxes (VAT). The plan, motor vehicles VAT is subsidized by 7 million rupiahs and car VAT is only subject to 1% of the origin VAT. These policies are expected to drive the growth of EV production in Indonesia.
This article was written by Bergman Siahaan