McKinsey: Indonesia's Electric Vehicle Adoption Lags Behind Thailand and Malaysia

President Joko Widodo (Jokowi) has ordered all government institutions to replace their official vehicles with electric cars. This regulation reflects Jokowi's commitment to transitioning from fossil fuels to new and renewable energy sources.

This order, detailed in Presidential Instruction Number 7 of 2022 issued on September 13th, applies to ministers, governors, regents, mayors, the Indonesian National Police (Polri), the Indonesian National Armed Forces (TNI), and the Attorney General's Office. Jokowi specifically instructed Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan to resolve any obstacles hindering the program's implementation.

According to McKinsey, the transportation sector accounts for approximately 17 percent of global greenhouse gas emissions. Therefore, stimulating supply and demand for electric vehicle (EV) adoption in the mass market will be crucial for Asian countries to meet their national emission targets and global climate change goals of not exceeding 1.5 degrees Celsius.

The transportation sector is one of the largest sources of greenhouse gas (GHG) emissions; therefore, progress in this area will be vital in meeting the climate change challenge in Asia. McKinsey estimates that between 2018 and 2050, the transportation sector could contribute approximately 14 percent of potential emission reductions.

In Asian countries, consumer adoption of EVs varies. Compared to mature markets like China and Japan, developing Asian countries—particularly India and ASEAN—lag behind. In 2021, EVs accounted for less than 1 percent of new vehicle sales in the region.

Electric vehicle adoption in Indonesia remains behind other Asian countries with developing EV market shares. McKinsey reports that only 0.1% of Indonesians have adopted electric vehicles, lagging behind Thailand and India, with adoption rates of 0.7% and 0.5%, respectively. Even Malaysia's EV adoption rate of 0.3% surpasses Indonesia's.

Nevertheless, McKinsey predicts rapid growth in the adoption of electric four-wheeled vehicles (E4Ws) in Indonesia. This is because Thailand and Indonesia are already major regional automotive production centers.

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