Indonesia has a big chance to develop electric cars. The government is getting serious in developing and pushing to become a manufacturer of electric vehicles. In order to be completed this year, the discussion on its legal basis will be accelerated. Development of its industry will also be pushed to begin next year, starting from electric motorcycles and battery industry.
Last week, a team of students from the University of Muhammadiyah Malang (UMM) won the 2018 Energy Saving Car Contest (KMHE) at the University of Padang. With the achievement of electricity consumption of 335.09 kilometres per kilo watt hours (kwh), their urban car – Genetro Suryo U.E.V 06 – made a world record. “Based on information from the committee of the contest, the UMM team’s figures broke records in Asia and the world,” said the UMM Mekatronik Team Advisor Muhammad Jufri, as quoted by Antara, Monday (12/3).
There is no doubt that Indonesia does have young people who can boast the country in developing technology, including electric cars. The problem is that none of the nation’s electric cars are produced commercially until now. Moreover, the government has not issued a legal basis for the development of electric cars in Indonesia.
After years of delay, the government said it is ready to continue and accelerate the discussion of the draft of presidential regulation (Perpres) for electric cars this month. The Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan said the discussion began with an internal meeting on Monday (12/3) and Wednesday (12/5), which then continued with the drafting of the Perpres this week.
The limited meeting (Ratas) led by President Joko Widodo (Jokowi) will discuss the finalisation of its legal basis. “We will propose it in the Ratas next week,” Luhut said after a coordination meeting with the House of Representatives (DPR) about electric cars at the Parliament Building, Jakarta, Thursday (11/29). He did not specify when the Perpres would be promulgated and applied, but he asserted that it would contain various things, including fiscal and non-fiscal incentives for the development of electric cars.
Several relevant ministries have previously discussed the draft of the Perpres, including the Ministry of Finance and the Ministry of Energy and Mineral Resources. It was handed over to the Ministry of Industry after being drafted by the Energy and Mineral Resources Ministry. On 15 October, the draft was submitted to Luhut to be coordinated and brought to the president.
The Industry Ministry’s Director of Maritime Industry, Transportation Equipment and Defense Equipment Putu Juli Ardika said the discussion of rules for electric cars involved various parties, including the Indonesian Automotive Manufacturers Association (Gaikindo), the Indonesian Motorcycle Industry Association (AISI), the Indonesia Automotive Parts & Components Industries Association (GIAMM), the Association of Small and Medium-Sized Automotive Component Companies (Pikko), and independent institutions such as Indonesian Engineer Union (PII) and Indonesia Automotive Institute (IOI).
The Industry Ministry also took independent institutions in the discussion process. They are researchers from educational institutions such as LPEM UI and ITB, and local electric vehicle industry players such as GESITS, Molina, Aplikabernas, and MAB.
Unlike conventional vehicles that require thousands of components, electric vehicles are quite simple. The main components are the Power Control Unit (PCU), battery, and electric motor. In order for Indonesia to become a strong manufacturer of electric cars, the government needs to develop the industry of these three components domestically.
This is the thing that is feared by entrepreneurs in the development of electric cars. The Gaikindo Chairman Yohannes Nangoi said the development of electric cars could potentially increase imports of automotive components. This is because the industry is not yet available in Indonesia, even though the domestic automotive industry is currently able to export to various countries.
He gave an example of a lithium ion battery, which is one of the main components of an electric car. Currently, there are only three countries producing electric vehicle batteries: China, Japan, and South Korea. “These batteries are expensive. One third of the total price of the vehicle, but the raw materials of lithium ion do not exist in Indonesia,” he said.
Luhut tried to dismiss the concerns of entrepreneurs by saying that Indonesia would build the largest lithium battery plant in the world. Lithium batteries are chosen because they are eco-friendly and can be recycled. The construction of the plant in Morowali, Central Sulawesi, will start on 11 January 2019. It takes two years, so it can begin production in 2021.
Currently, investors from China, Japan and South Korea are interested in investing their capital worth a total of US$ 4.3 billion (equivalent to Rp 61.5 trillion). In the initial phase, they will disburse US$ 700 million. “That is only the initial investment because later there will be various types of batteries,” Luhut said.
With the existence of the factory, Indonesia will be an important player in the electric vehicle industry. Currently, China is still the largest lithium battery producer in the world. In addition to batteries, the Indonesian government also offers investors to build other electric vehicle components.
In order to attract investors, it also provides tax holiday. This incentive is an income tax exemption (PPh) in a certain time. Three industries can obtain this facility. They are electric motor industry that is integrated with the manufacture of magnets, electric motor industry that is integrated with the manufacture of coils, and battery industry. There is also a reduction in income tax (tax allowance) for component industries and other supporting industries.
The government said it would also provide large market support for the development of electric cars. This support is given by exempting taxes so that electric cars can be sold at low prices and people are interested in buying these vehicles.
In developing electric vehicles, the Industry Ministry proposed the provision of luxury goods tax (PPnBM) incentives. In this proposal, cylinder capacity as the current basis for calculating the PPnBM is changed with carbon dioxide (CO2) produced by the vehicle. The lower the carbon emissions, the lower the tax.
The rules about electric cars will protect the existing automotive industry. Development of electric cars has an incentive-based policy direction. It is not a restriction for other types of automotive. The government ensures that existing industries are not disrupted because they have issued large investments, absorbed large amounts of labour, and created a multiplier effect for the derivative industry. The policies taken must provide business certainty and reflect consistency.
The government set the development of electric vehicles to start from motorcycles. For electric cars, the development is initially directed at certain areas, such as tourist areas, industries, offices, and other regions. It also directs the electric vehicles to be used as public transportation and operational vehicles of state agencies, state-owned enterprises (SOE), and regional companies.
Development of electric motorcycles is already running, and its production phase will start early next year. PT Wijaya Karya teamed up with PT Gesits Technologies Indo (GTI) in building a manufacturing plant for electric motorcycles in Cilengsi, West Java. With an initial investment of Rp 180 billion, the plant is capable of producing 60,000 units of Gesits motorcycle per year starting in February 2019.
This electric motorcycle has been tested by riding it from Jakarta to Bali. President Jokowi even tried to ride it last month at the Presidential Palace Complex. “If this motorcycle has been produced, I will be the first buyer. I will buy 100 [units],” he said. He also promised that the government would simplify the feasibility test and licensing so that it could be marketed immediately.
Gesits is the work of Indonesian people initiated by Garansindo together with the 10 November Institute of Technology (ITS). This is the first electric vehicle made in Indonesia and has officially become a National Electric Motorcycle. The level of domestic content (TKDN) for its production is reaching 87 percent.