2 weeks Ago By gp
KARAWANG (AFP) – Rows of robotic arms move with precision to assemble nickel-based battery cells on the production line at Indonesia’s inaugural electric vehicle (EV) battery plant, the first in Southeast Asia. After being chosen by a joint venture of South Korea’s Hyundai and LG for the USD1.1 billion factory, Indonesia is now looking to boost investment to give it an edge in the race to become a regional EV hub.
When he opened the West Java plant in July then-president Joko Widodo said such investments would make Southeast Asia’s biggest economy an “important global player” in the EV supply chain. But while the country boasts the world’s largest nickel reserves, analysts pointed out that it still faces a battle owing to its poor processing and refining capacity, environmental worries and the rise in other types of batteries. It also has some way to go to rival Thailand, which Krungsri bank said had market share of 78.
7 per cent of Southeast Asia’s EV sales as of early 2023, with Indonesia following with eight per cent. AFP was given rare access to the factory floor to get a glimpse of the plant’s complex battery cell production, most of which will be shipped to Hyundai subsidiaries in South Korea and India. Hyundai said the new factory was a commitment to helping the archipelago become a supercharged Southeast Asian EV maker.
“It shows we are ready to support the government’s desire to become a hub for Southeast Asia,” chief operating officer of Hyundai’s Indonesian subsidiary Fransiscus Soerjopranoto said. The government has unveiled a number of incentives to boost the EV market, including a luxury goods tax exemption that has boosted sales and seen a flurry of key brands entering Indonesia’s 280 million-strong market, including China’s BYD and Vietnam’s VinFast. More than 23,000 battery-powered cars were sold to dealers between January and August this year, compared with 17,000 in all of 2023, Indonesian automotive association data showed.
Under the regulations unveiled last year, EVs imported to Indonesia are free of duties until 2025 if companies commit to building production facilities and producing as many cars in the country as they import by the end of 2027. And Chinese automaker Wuling announced a plan last month to produce EV batteries at its Indonesia factory by the end of 2024, local media reported. “We see a huge potential for EV purchase in Indonesia compared to other countries in Asia,” said BYD Indonesia official Luther Panjaitan.
Key to Jakarta’s strategy has been luring automakers before they establish plants elsewhere, said Rachmat Kaimuddin, a government official who left in the transition to President Prabowo Subianto’s administration last week. However, the burgeoning industry faces challenges. While Indonesia aims to become one of the world’s top three producers of EV batteries, investment in the sector remains relatively small.
While Indonesia is number one for nickel reserves, it will be importing materials for the new factory including processed nickel from South Korea and China owing to its lack of related industries, said president director Hong Woo-pyoung of the joint venture, PT HLI Green Power. And environmentalists warn nickel mining is one of the key drivers of Indonesian deforestation, while analysts added that the rise of cheaper lithium iron phosphate (LFP) batteries, widely adopted in China, could hurt demand. Researcher Andry Satrio Nugroho at the Institute for Development of Economics and Finance said the policies were “not pro-nickel” because all carmakers got the same incentives.
But Rachmat said Indonesia has raw materials to make LFP batteries as well. A global oversupply of batteries could make it harder for Indonesia to attract more investment, said Managing Director Putra Adhiguna of Energy Shift Institute..
