Indonesia’s electric vehicle (EV)-friendly policies have not only attracted global investors to the country but also have the potential to boost investments in the Southeast Asian automotive industry as a whole. The CEO and president director of Bakrie & Brothers, Anindya Novyan Bakrie, stated that Indonesia could serve as the “gateway” to the Association of Southeast Asian Nations (ASEAN) due to its rich resources of copper, nickel, cobalt, and bauxite, which are essential for manufacturing EV batteries. With its status as the largest nickel exporter globally, accounting for 22% of the world’s reserves, Indonesia aims to leverage its natural resource wealth to become a key global supply chain hub for electric vehicles.
Indonesia’s strategic positioning has caught the attention of leading companies like Tesla, which have shown interest in tapping into the country’s natural resources. The ban on exports of certain metals and minerals, combined with the government’s push for the beneficiation of natural resources, has created an enticing environment for investors and manufacturers seeking these materials. Both Toyota and Hyundai, among other Asian automakers, have made billion-dollar investments to expand their EV production facilities in Indonesia. As highlighted in a 2022 ASEAN investment report, the production of EV batteries has accounted for a significant share of foreign direct investment in the region, particularly in Indonesia, Malaysia, and Thailand, between 2019 and 2021.
While Indonesia’s efforts to boost vehicle production are commendable, the country does face several challenges in establishing itself as a regional vehicle production hub. Thailand, with its well-established export-oriented automotive industry, poses a significant obstacle for Indonesia in this regard. Additionally, lower-cost producers such as Vietnam and the Philippines are emerging as competitors. Nishita Aggarwal, an automotive analyst at EIU, acknowledges that it will be tough for Indonesia to replace Thailand’s position. Nonetheless, the growth of Indonesia’s EV sector can have a positive impact on its neighboring countries.
Indonesia’s emergence as a prominent player in the EV industry can have a spillover effect on the entire ASEAN region. By providing access to key materials for EV batteries, Indonesia has the potential to attract more investment and accelerate the adoption of electric vehicles in ASEAN countries. Maybank’s report suggests that Indonesia’s role as a global EV battery hub could benefit the region by facilitating faster and more cost-effective EV adoption. However, Bakrie & Brothers, an Indonesian conglomerate, emphasizes that investors are likely to view the ASEAN region as a whole when considering EV production. The CEO of Bakrie & Brothers believes that countries in the region can collaborate and combine their strengths and expertise to foster the growth of the EV ecosystem.
Complementary Roles in the ASEAN EV Ecosystem
Despite Indonesia’s dominance in the upstream sector of the EV supply chain, other Southeast Asian countries can play complementary roles to strengthen the region’s EV ecosystem. Malaysia, for instance, offers a niche product mix of high-tech goods, especially in the era of increasing digitalization in the automotive industry. BMI’s Tsoai notes that within ASEAN, Indonesia will primarily focus on the upstream sector, while other countries can contribute with their expertise in different areas. Through collaboration and leveraging each country’s unique strengths, the ASEAN region has the potential to become a formidable force in the global EV market.
Indonesia’s efforts to attract investments and develop its domestic EV industry are not only benefiting the country but also have the potential to uplift the broader Southeast Asian automotive industry. With its abundant natural resources and favorable policies, Indonesia can serve as a gateway to ASEAN for EV production and supply chains. While challenges exist, collaboration between ASEAN countries and leveraging their respective strengths can further enhance the region’s EV ecosystem. By fostering cooperation and innovation, ASEAN has the opportunity to position itself as a major player in the global electric vehicle industry.
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