Indonesia's EV hub ambition boosted by China firms

But hurdles remain in journey to be regional production base amid stiff competition

- Linda Yulisman

BEKASI, West Java - Along the production line, technicians secure an engine, cables and window frames onto a vehicle body. Down the assembly line, a car emerges.

The Handal Indonesia Motor (HIM) plant, an hour's drive from Jakarta, began in the 1970s as a small facility that assembled cars for Nissan.

Later, Hyundai began assembling its cars there in 1995.

Since December 2023, a different breed of vehicles has been rolling off HIM's assembly lines.

The plant now assembles electric vehicles (EVs) under Chinese brands Chery and Neta, in addition to traditional petrol cars from both companies and another Chinese carmaker, Jetour.

Indonesia is South-east Asia's largest auto market, with a million vehicles sold each year.

To boost EV adoption, the government has lifted the luxury tax and the import tax on them until the end of 2025, among other incentives for car buyers.

Sales of battery-operated electric cars in Indonesia surged by 65.1 per cent to 17,051 vehicles in 2023, from 10,327 the year before, according to wholesale data from the Indonesian Automotive Manufacturers Association. Sales of hybrid cars also jumped by 4.2 times to 54,179 in 2023 from 2022.

To lure investment, the government has promised tax exemptions to manufacturers, depending on the value of their investment and their use of locally sourced components.

Indonesia has been a well-known manufacturing hub for Japanese petrol cars since the 1960s, but now it is also looking to expand its EV production capabilities.

At least 10 brands, including five Chinese ones, have invested in the country in the past few years.