Largest Electric Vehicle Supply Chain Investment for Battery Production

Many businesses have already invested in the electric vehicle (EV) manufacturing supply chain in Indonesia.

This is evident from an analysis by the Institute for Essential Services Reform (IESR) using data from Rigel Capital (2022) and Indonesia Battery Corporation (IBC) (2021).

The report shows that investment in electric vehicle battery production reached US$15 billion or Rp224.83 trillion (assuming an exchange rate of Rp14,988 per US$, May 31, 2023). This is the component that has received the most investment.

Second is the Original Equipment Manufacturer (OEM) sector, valued at US$5.2 billion or Rp77.94 trillion. OEMs refer to companies that manufacture components and then resell them to other companies.

Third is mining for electric vehicles, with a value of US$160 million or Rp2.39 trillion. Fourth, and the smallest investment, is in recycling plants, at US$30 million or Rp449.66 billion.

However, the research team notes that the domestic electric vehicle supply chain is not yet integrated.

"Approximately US$20 billion has been invested across the supply chain, but some battery producers and recycling plants will not be operational until at least 2025," the team wrote in its report.

To unlock the potential to become an electric vehicle manufacturing hub, the team believes the government needs to provide incentives to the upstream electric vehicle industry to help it become more competitive, accelerate price reductions, and create a significant multiplier effect on the economy.

"Currently, existing upstream incentives are limited to a reduction in Risk-Weighted Assets (RWA) for electric vehicle financing (production and purchase) from 75% to 50%," said the research team.

Various incentives have been implemented in more advanced electric vehicle markets to encourage the manufacturing industry, such as the Advanced Chemistry Cell Production Linked Incentive (ACC PLI) in India.

The team explained that India has exempted taxes, tariffs, and duties for its battery industry. At the regional level, this policy is combined with job creation benefit packages.

(Also read: High Prices and Charging Issues: Obstacles to Electric Vehicle Adoption in Indonesia)