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Electric vehicles: Powering Indonesia’s next industrial growth June 2021
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THE AUSTRALIA-INDONESIA CENTRE:
P O L I C Y PA R T N E R S :
PA R T N E R S F O R I M PA C T:
Authors: Kevin Evans and Eugene Sebastian About the Australia-Indonesia Centre
The Australia-Indonesia Centre is a bilateral research consortium
In putting this report together, we would like to extend a special supported by both governments, leading universities and industry.
thanks to a number of people who offered views, corrections and Established in 2014, the Centre works to advance the people-
perspectives. This includes Dr Ariel Liebman, Mr Febi Trihermanto, to-people and institutional links between the two nations in the
Ms Helen Brown, and Mr John McBeth. In addition there were also fields of science, technology, education, and innovation. We do this
a number of people from industry and government who provided through a research program that tackles shared challenges, and
additional inputs. through our outreach activities that promote greater understanding
of contemporary Indonesia and strengthen bilateral research
March 2020
linkages.
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commercial purposes.
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Disclaimer
The views expressed in this publication are the authors’ own and do
The report is a general overview and is not intended to provide not represent those of the Australia-Indonesia Centre.
exhaustive coverage of the topic. The information is made available
Copyright ©Australia-Indonesia Centre 2020 | Volume 1 |
on the understanding that the AIC is not providing professional
Publication Date 1 June 2021
advice.
While care has been taken to ensure the information in this report Citation
is accurate, we do not accept any liability for any loss arising from Evans, K. & Sebastian, E., 2021, Electric vehicles: powering
reliance on the information, or from any error or omission, in the Indonesia’s next industrial growth, The Australia-Indonesia Centre,
report. June, Melbourne
We do not endorse any company or activity referred to in the
report, and do not accept responsibility for any losses suffered in
connection with any company or its activities.
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Electric vehicles: powering Indonesia’s next industrial growth 2
ausindcentre.org Indonesia’s EV plans will open new trade and commercial opportunities for Australia’s services Indonesia’s pace of industrialisation, which helped propel the economy from the late 1980s to the 1990s, slowed dramatically in the aftermath of the Asian Financial Crisis. In the past two decades, that pace has lagged behind the overall economy’s growth. This is now changing as significant investments in new industrial sectors over the past few years supported by a series of government policies focused on encouraging industrial development are now beginning to bear fruit. Indonesia’s first burst of industrial expansion led to huge two-way trade growth with Australia. Are we about to see a new era of rapid growth in commercial partnerships? Electric vehicles: powering Indonesia’s next industrial growth 3
ausindcentre.org
The dynamics related to these While it has taken some time, there
developments are fascinating. It is a growing sense that a coherent
includes a realignment of economic national industry policy is taking
activity and its expansion towards shape. At the same time, significant
east Indonesia, especially Sulawesi regional economic developments
and the North Moluccas. Future are unfolding to attract the large
developments will also include investments required to fuel a
adjustments to the regional new wave of industrialisation and
distribution of automotive exports.
production in Southeast Asia and
beyond, most notably in the area This report explores important
of electric vehicles. For Indonesia, industrial changes taking place in
there will be an increase in demand Indonesia. It focuses specifically
for improved logistics management, on recent developments in the
skills training and infrastructure electric vehicle (EV) sector. It
connectivity, some of which are firstly covers industrial policies
already underway over the past that have supported the take-off
decade. These national efforts to of Indonesia’s nickel processing
move up the value chain in terms industry. Secondly, it overviews
of sophisticated manufacturing how its industrial policies are laying
and management will also need the foundations for an EV industry
the support of more research and including in battery manufacturing.
development. Finally, it outlines potential
opportunities for cross-border trade
For Australia, these Indonesian and wider commercial partnerships
developments offer an opportunity in Indonesia’s EV development.
to boost exports in critical
minerals such as lithium, cobalt
and sophisticated services. For
Indonesia, the emergence of
a competitive new automotive
industry provides opportunities for
export to Australia and, in particular,
to take advantage of the special
benefits accorded to Indonesian
made electric vehicles under the IA-
CEPA. Collectively these new trade,
investment and broader commercial
opportunities highlight the merits
of the powerhouse concept in
practice, where the two countries
bring complementary skills and
strengths together to branch into
third markets.
Electric vehicles: powering Indonesia’s next industrial growth 4
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INDONESIAN INDUSTRY The following is a summary of PROMOTING ELECTRIC
POLICY OVER THE several key policies that are helping B A T T E R I E S F O R
YEARS to promote the current wave of VEHICLES
industrial development.
Historically Indonesia has pursued
several policies aimed at promoting As part of its efforts to reduce
industrialisation. These have VALUE ADDED IN national greenhouse gas emissions,
included state-led capital intensive M I N E R A L S P R O C E S S I N G the previous government under
investment in oil and related President Yudhoyono, established
industries during the oil booms, or a policy in 2013 to promote a
efforts at “leap-frogging” industry For more than a decade, successive low-cost green car (LCGC). Its
by investing in capital intensive Indonesian Governments have efforts included special luxury tax
advanced manufacturing such as sought to boost domestic value deductions for vehicles complying
those promoted in the 1980s and added to the nation’s significant with greener energy usage and
1990s that were spearheaded by mineral resources. It has imposed, promoting biodiesel, bioethanol and
then Research and Technology for instance, restrictions on the hybrid vehicles.
Minister B.J. Habibie. export of mineral ores. A number
of investors, foreign and local, The current President, Joko Widodo,
Another policy approach in the have begun steadily to establish took this policy further when he
mid-1980’s focused on reducing manufacturing facilities locally introduced a low carbon emission
barriers to trade, investment and to process key mineral ores. An vehicle (LCEV) policy in his first
bureaucratic hurdles which enabled example is nickel. Last year, a full term. The policy outlined concrete
Indonesia to become a major ban on exporting nickel ore came actions in Presidential Regulation
exporter of footwear, clothing and into effect. 55/2019 on the Acceleration
textiles by the early 1990s. A final Program for Battery Based Electric
approach has been to restrict the While there have been adjustments Vehicles for Road Transport.1
export of certain raw materials and revisions to the implementing The focus of this regulation is to
to compel downstream users to schedules of these regulations, advance Indonesia’s transformation
process these materials inside the general trajectory of the policy from internal-combustion based
Indonesia. Local processing was has been quite clear: to develop engines directly to electric vehicles
adopted for example in banning the the country’s downstream mining powered by batteries.
export of logs. This led to significant industry.
investment in plywood leading Of importance to note is one of
Indonesia to be the largest exporter the key mineral ingredients in most
globally. forms of electric vehicle batteries is
nickel.
1 https://sipuu.setkab.go.id/PUUdoc/175904/Perpres_Nomor_55_Tahun_2019.pdf
Electric vehicles: powering Indonesia’s next industrial growth 5
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STREAMLINING THE TRADE LOBBYING
BUREAUCRACY
In another signal of the Indonesian Government’s determination to
President Widodo has promote the development of an electric vehicle) industry, it was able to
been very energised since secure agreement as part of the IA-CEPA to provide for specific rules
regarding rules or origin that should support Indonesian EV exports to
taking office to improve
Australia.
Indonesia’s ease of doing
business, believing this N I C K E L- B A C K E D B O O M
to be a key impediment
Indonesia, like Australia, is a nation with significant deposits of certain
to encouraging further minerals. Figure 1 provides a picture of where Indonesia stands globally
investment in the country. with regards to certain key minerals. For the sake of comparison, the
size of Indonesia mineral deposits are compared with Australia’s known
As noted in an earlier report2 reserves.
Indonesia has been making solid
progress in improving its standing in Figure 1: Indonesia’s key minerals deposits compared to Australia
the global ranks of the ease of doing
business3 until 2018, after which
Percent world Indonesian reserves as % of
time progress stopped. This was a Mineral Global ranking
reserves Australian reserves
problem as many of Indonesia’s
regional neighbours,and competitors Nickel 1st 22% 105
for foreign investment, continued to Tin 2nd 18% 200
improve.
58
Copper 5th 6%
To improve the efficiency of
Bauxite 6th 7% 48
public administration in order
to encourage investment and Gold 7th 5% 26
the creation of employment, the
Government enacted Law 11 Source: US Geological Service 2021 and (2019 edition for data on Cooper)
of 2020 on Job Creation.4 This
omnibus law represents a major
effort to restructure many of the
administrative policies and practices
of the central government and
regional authorities with a view
to easing and encouraging more
enterprise and investment in the
country.5
2 Evans, K, 2021, Indonesian slip on Corruptions Perception Index: A wake-up call for the country, AustraliaIndonesia.com, February 24 -
https://australiaindonesia.com/aic/commentary/indonesian-slip-on-corruptions-perception-index-a-wake-up-call-for-the-country/
3 The Ease of Doing Business is a composite index managed by the World Bank that compares 190 countries along 10 separate
indicators. https://www.doingbusiness.org/en/rankings
4 https://sipuu.setkab.go.id/PUUdoc/176266/UU_Nomor_11_Tahun_2020.pdf
5 Evans, K, 2021, Warp Speed: Implementing Indonesia’s Job Creation Law, AustraliaIndonesia.com, March 3, https://australiaindonesia.
com/aic/commentary/warp-speed-implementing-indonesias-job-creation-law/ - article explains the early implementation of the omnibus law
Electric vehicles: powering Indonesia’s next industrial growth 6
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In terms of nickel mining Figure 2 Figure 2: Top five mining countries - 2019-2020
provides a picture of the top five mining
Production in
countries in 2019 and 2020. Indonesia Nickel Global ranking 2019
Production in 2020
is ranked number one, followed by the Producers Thousand tonnes
Thousand tonnes
Philippines and Russia. Australia is
Indonesia 1st 853 760
ranked number five.
Philippines 2nd 323 320
Efforts to force the pace on minerals
Russia 3rd 279 280
processing in Indonesia are now
beginning to bear fruit, most notably New Caledonia 4th 208 200
with regards to the processing of
nickel. Grounds central for this nickel Australia 5th 159 170
processing are to be found in Central
Global total 2,610 2,500
Sulawesi and North Maluku, with
processing facilities located quite close
Source: US Geological Service 2021 (Page 113)
to mining locations. The expansion of
these nickel processing operations are
now having a significant impact on the
economic growth rates in these two
provinces.
Figure 3: Map of Central Sulawesi: Morowali emerges as a hub for nickel bordering three provinces
Electric vehicles: powering Indonesia’s next industrial growth 7
ausindcentre.org Notably, among Indonesia’s 34 These figures are based on constant provinces, both of these provinces prices.6 While less spectacular, the bucked the national economic rates of growth in the Province of North recession of 2020 with each recording Maluku, supported by fast growth in growth of 4.9% while the Indonesian the key nickel processing districts of economy contracted by 2.1%. There Central and South Halmahera, have can be no doubt in these provinces averaged 6.3% over the past eight that this is nickel-led growth, especially years, comfortably above the 5% when looking at the much faster rates nationally. of growth that are taking place in the three districts where the processing is concentrated. Over the past decade, the District of Morowali in Central Sulawesi grew by 1,200% versus the whole province’s growth of 161%. Figure 4: Map of North Maluku: significant nickel activities in 2 districts 6 Assorted data from https://sulteng.bps.go.id/ and https://malut.bps.go.id/ Electric vehicles: powering Indonesia’s next industrial growth 8
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This processed nickel is being In addition to the Province of Our sources in the industry suggest
transformed into pig nickel-iron to Central Sulawesi, there is significant the problem for Chinese producers
produce stainless steel. Much but nickel mining in the northern is that Indonesia’s production costs
not all of the investment is being districts of the provinces of South are something like 60% lower than
driven by Chinese commercial Sulawesi and Southeast Sulawesi. those in China, largely supported
interests. by the fact that the nickel ore is
In terms of its growing mined very close to the industrial
Another notable feature of manufacturing capacity for a production zones. This suggests
investment inflow is its impact product like stainless steel, that Indonesia enjoys some huge
on export value. Monthly exports Indonesia began to explode on natural competitive advantages.
from the Province of Central the global market about five years The European Union is also applying
Sulawesi before investments ago. Between 2015 and 2019 anti-dumping provisions, accusing
coming on stream were in the the country’s exports of stainless Indonesia of seriously harming the
order of USD200 million per year. steel rose by a factor of 520 with European stainless industry.11
With investments these days, expectations that in 2021 Indonesia
the figure is USD600 million per will be the largest exporter of These nickel processing
month.7 stainless steel in the world.9 The developments form part of the wider
largest market for Indonesian basic metals industrial sector. Figure
These nickel related stainless steel is China. 5 provides a picture of the growth
developments support a wider of realised direct foreign investment
trend evident since the turn Intriguingly, considering much of the (DFI) in this sector over the past 15
of the century in which most relevant investment is sourced from years.
of the Indonesian provinces China, Beijing is accusing Indonesia
enjoying the fastest rates of of dumping stainless steel in its
growth in Indonesia are to be market.10
found in Sulawesi. This does not
Figure 5: Growth in direct foreign investment (DFI) in the basic metals
mean that these provinces are
sector
suddenly becoming the richest
per capita. Rather it is a case of USD Mn
an accelerated catch up towards 6000
5923
reaching the national average.8
5000
For example, per capita incomes
in Central Sulawesi rose from 4000
3488
68% of the national average 3000
2780
2581
2057
in 2010 to actually exceed the 1569
1980
2000 1289 1944
national average by nine per cent 830
1684
Qtr 1, 2021
in 2020. Neighbouring South 1000
42 52
354
150 117
Sulawesi enjoyed an increase 0
from 74% to 93% of the national
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
average.
Source: nswi.bkpm.go.id
7 Badan Pusat Statistics, 2021, Number of Central Sulawesi Exports-Imports, cited: https://sulteng.bps.go.id/indicator/8/29/9/nilai-ekspor-
impor-sulawesi-tengah-juta-us-.html
8 https://www.bps.go.id/indicator/52/288/4/-seri-2010-produk-domestik-regional-bruto-per-kapita.html
9 https://bisnis.tempo.co/read/1283337/2021-luhut-yakin-ri-jadi-eksportir-stainless-steel-terbesar
10 https://industri.kontan.co.id/news/ini-perusahaan-yang-dituduh-dumping-baja-oleh-china
11 Eurofer, 2020, Definitive anti-dumping duties on Indonesia, China and Taiwan stainless steel imports a necessary measure - cited:
https://www.eurofer.eu/press-releases/definitive-anti-dumping-duties-on-indonesia-china-and-taiwan-stainless-steel-imports-a-necessary-
measure/
Electric vehicles: powering Indonesia’s next industrial growth 9ausindcentre.org
Drilling down a little further in this Figure 6: Direct foreign investments in basic metals by region
data from Indonesia’s investment USD Mn
agency, BKPM, reveals the leading 6000
sources of investment that are
5000
taking place in this sector. The
4000
most notable feature here has
been the rise of China as the key 3000
investor in this sector since the 2000
middle of the last decade. The 1000
huge growth in realised DFI since 0
2018 looks set to continue with a
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021*
solid start to activity taking place in
China (inc HK) Asia ex China Australiasia *Qtr 1, 2021
the first quarter of 2021. Notable
Europe Americas Haven/multi-state
too has been the near absence
of investment in this sector from Source: nswi.bkpm.go.id
Europe and the Americas. (See
Figure 6)
INDUSTRIAL Chemicals, and including China’s producers, led by Toyota - that have
DEVELOPMENTS: Contemporary Amperex Technology totally dominated the Indonesian
BATTERIES AND (CATL). There is also interest from auto sector for the past half a
ELECTRIC VEHICLES Korea’s Samsung SDI, China’s BYD century - are also looking to
Auto and Farasis Energy as well as strengthen their auto manufacturing
Japan’s Panasonic. Added to this capacities in Indonesia. The
In this section, we focus on how is considerable speculation about strength of Japanese manufacturing
Indonesia is laying the foundations Tesla setting up a vehicle or battery in “post-combustion engine”
for an impending take-off in the manufacturing plant. In the end it vehicles is more in hybrid rather
electric vehicle and the EV battery may well be that their Indonesia than direct to EV battery alone.
manufacturing industry. strategy consists of other areas of Nonetheless, they clearly see value
Further downstream from the commercial interest given that Tesla in investing in a “transitional” phase
nickel processing facilities in east seems to have more focus on India of consumer demand, assuming
Indonesia will soon be found EV as their EV manufacturing hub for that demand for EV battery vehicles
battery manufacturing capacity the region.12 will take considerable time to
together with some re-energised dominate the Indonesian and
investment in the automotive In addition, several automakers, regional markets.
sector. led by Korea’s Hyundai, are also
looking to develop or expand their
The Indonesian Government’s automotive manufacturing capacity
policies to encourage the in Indonesia. This company is
development of an EV battery currently moving one factory from
sector has stimulated interest China to Indonesia and relocating
and commitments from a number its regional HQ from Malaysia to
of producers led by Korea’s LG Indonesia. Major Japanese auto
12 https://www.cnnindonesia.com/ekonomi/20210201171515-85-600969/potensi-investasi-baterai-mobil-listrik-tembus-rp2423-t
Electric vehicles: powering Indonesia’s next industrial growth 10ausindcentre.org
In EV battery-powered motorcycles, Figure 7: Direct foreign investments in the automotive sector
there are even prospects of
USD Mn
Indonesian developed and owned
3500
makers emerging. One such
group to watch would be Gesits 3000
(Garansindo Electric Scooter ITS). 2500
Gesits is developed by Australia- 2000
Indonesia Centre partner university,
1500
the Institute of Technology
Sepuluh Nopember (ITS), based 1000
in Surabaya. Gesit has expanded 500
Qtr 1, 2021
production to Bogor, West Java. 0
Local start-up producers, like
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021*
Gesit, add new prospects for
Source: nswi.bkpm.go.id
independent component makers,
both Indonesian and foreign, to
Drilling a little deeper into the sources of investment the following
forge new partnerships that may
picture emerges in terms of the origin of investment. (See Figure 8) The
not be accessible to established
long term dominance of the sector by Japanese investors may now be
commercial arrangements between
facing a challenge from automakers from South Korea.
the traditional producers.
Much of this sophisticated Figure 8: Direct foreign investments in the automotive sector by region
manufacturing capacity is expected
to be located along the north coast USD Mn
of Java, although some additional 3500
processing of nickel inputs towards 3000
the final EV batteries could also 2500
be undertaken in the nickel-based 2000
industrial zones in Central Sulawesi 1500
and North Maluku. 1000
0
Over the past 15 years, levels of
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021*
realised direct foreign investment
*Qtr 1, 2021
(DFI) in the automotive sector Japan South Korea China (inc HK)
Other Asia Europe Americas
peaked in the mid-2010s. Looking Haven/multi-state
at the results for the first quarter of
2021 suggests the results this year Source: nswi.bkpm.go.id
could be significantly higher than
the past few years. (See Figure 7)
Electric vehicles: powering Indonesia’s next industrial growth 11ausindcentre.org Like investments in nickel and Significant preparatory investments mineral ore processing, it is again in connecting and enabling notable that investors from Europe infrastructure to support the and the Americas are largely proposed boom in EV and battery absent from this sector as well. production are being undertaken in Two possible caveats to consider Central Java, especially to the west with this data are that part of the of Semarang City, as well as in the automotive investment from China Rebana development zone located could be sourced from Wuling, in the north eastern regions of a joint venture based in China West Java. There are also expected between Chinese automakers and to be some investments focused General Motors from the USA. on expanding auto manufacturing In addition, the component of in the already well established investors grouped under ‘ haven/ industrial zones of Bekasi located multi-state group’ consists of at the far north-west of West Java, investors whose funds are housed and bordering Jakarta. in locations like the British Virgin Islands and/or from businesses from several countries pooling resources for some or other investment project in Indonesia. Figure 9: Semarang city (kota) and Kendal, Central Java Electric vehicles: powering Indonesia’s next industrial growth 12
ausindcentre.org For the new industrial zones in In addition to the connecting West Java and Central Java, major transport infrastructure required to infrastructure support is being put support the logistical movement of in place including major modern materials, there is also a need to ports in Kendal (Central Java) and establish effective industrial parks Patimban (West Java). Both need to house and support other aspects to be well connected to the new of industrial output, including cross-Java toll roads while major the provision of electricity, water new international airports have been and telecommunications. Some built in Semarang City in Central of these are at various stages of Java and the District of Majalengka development. in northern West Java. There are also long-established train lines that pass by these regions, although there may be a need to develop connecting “spur” lines to connect them to the trunk lines and the port and industrial areas given the density of population and vehicular traffic in the surrounding regions. Figure 10: Rebana and Patimban, West Java Electric vehicles: powering Indonesia’s next industrial growth 13
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THE NEW SOE ON THE BLOCK memory. Indeed Indonesia has been a net oil/gas importer for some
years. In terms of the security of the nation’s current account in trade,
The Government created a new there is clearly a need to ensure that the oil/gas sector does not become
State-Owned Enterprise (SOE), a serious burden. The transition of Indonesia from being a net oil/gas
Indonesia Battery Corporation exporter to becoming a growing net importer can be seen in the following
(IBC) in mid-March 2021. The chart. See Figure 11)
vision is for this holding company
to play a role along the value chain Figure 11: Indonesia’s Net oil/gas exports
from nickel mining through to EV USD Mn
battery vehicle production. It is a 25000
very ambitious and potentially risky 20000
development. These industries are 15000
all very competitive globally and 10000
will suffer the consequences of 5000
having to “carry” under-performers 0
that detract from industrial -5000
performance, efficiency and cost- -10000
competitiveness. -15000
-20000
Noteworthy, however, are the
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
four SOEs that are investing in
this holding company. These are Source: BPS
PT Pertamina (the state oil/gas
company), PT Perusahaan Listrik In addition, there is also a need for Pertamina to widen its revenue and
Negara (PLN), the state electricity income base beyond its traditional sources of oil and gas. Much as with
generator and transmitter, PT other traditional oil and gas producing companies globally, Pertamina
Indonesia Asahan Aluminium is also seeking to begin to expand its energy interests to “cleaner”
- Inalum (the state aluminium fuels.13 To support EV battery-powered vehicles, Pertamina has a vast
company) and PT Timah (the state franchise network of petrol stations across the nation. Ensuring that
Tin mining company). Each has a these are incentivised and equipped safely with recharging and related
25% equity stake in IBC. capacities will be an important contribution by Pertamina to the success
of the EV vehicle revolution in Indonesia. It also provides an incentive for
While of course a little speculative Pertamina to embrace constructively these changes.
at this early stage, there may be
some interesting synergies to these At the same time, Pertamina is facing major challenges in terms of
companies’ involvement. capital requirements just to manage and maintain its existing production
facilities. This is especially so considering it has now acquired significant
For Pertamina, it is clear that the new oil/gas production centres in Riau and East Kalimantan from long
future prospects for the Indonesian term foreign investors.14
oil/gas sector are quite poor with
the golden age of Indonesia’s oil
industry an increasingly distant
13 https://www.pertamina.com///Media/File/Pertamina_AR_2019_Final%20Indo_Hires.pdf
14 https://www.thejakartapost.com/news/2018/01/01/pertamina-takes-over-mahakam-from-total-inpex-.html and https://theconversation.
com/pertamina-gets-rokan-oil-block-from-chevron-what-does-this-tell-us-101455
Electric vehicles: powering Indonesia’s next industrial growth 14ausindcentre.org
For PLN, there is a key value-add to of PLN generated power is sourced that inhibit it from deploying
support the EV revolution through from fossil fuels, including almost the kind of nimble corporate
ensuring the supply and secure two thirds from coal alone.15 engagements that its purely private
distribution of power for recharging sector partners and competitors
facilities together with safe and As a result, it may be that the enjoy. At the same time, however,
user-friendly access to facilities for industrial parks will need to consider IBC does bring into the dynamic
consumers including at home, work other options for securing electricity of industry development many
and recreation/shopping locations. sourced from new and renewables of the shareholders that, if left
in order to guard against this outside these important industrial
The emerging structural commercial risk. developments, would see more
surplus in electricity threat than benefit from them.
For PT Inalum and PT Timah, there
generation capacity,
are advantages in being more More information about the early
thanks to significant
closely connected to the nickel stages of development of IBC can
investment over the past mining sector. With specific regards be found in the attached report
decade, sees PLN with to Timah, the presence of certain from our partners at the ITB School
a clear vested interest rare earth elements in the tailings of Business Management.16
in boosting demand of tin mining can add an additional
for electricity. This is key input to feed the resource
especially the case in the needs of the EV sector. MIND IN
core grid zone of Bali- (the state-owned holding company
Java. that owns a majority of shares of
Timah and Inalum) also has an
Much of this additional power is interest in the EV industry given the
being generated by a series of new importance of copper and bauxite in
coal-fired power plants. the production of electric vehicles.
This creates a challenge, indeed As noted at the outset of this
a threat, that producers of these section, a big question that may
EV related components will face, affect the pace and scale of
especially if they have an eye to development, and the medium
the export market. International to long term competitiveness of
consumers, in looking to reduce the EV battery sector will be the
their carbon footprints, may extent to which the IBC becomes
be concerned about buying net value-add to the sector or a
goods, or final products made complicating factor that slows
from components, that were down growth. Being an SOE means
manufactured on the back of coal- the company is likely to face a
fired electricity. Currently, over 90% number of operational constraints
15 https://web.pln.co.id/statics/uploads/2021/04/Statistik-Indonesia-2020-unaudited.pdf P. 33
16 https://0c05fe27-36b5-405e-ba6c-3c00e10e89c4.filesusr.com/ugd/bb9b3a_8cab9fa2f27a4af19eb64bd091a77479.pdf
Electric vehicles: powering Indonesia’s next industrial growth 15ausindcentre.org
POWERING AUSTRALIA- billion-dollar boost to the value of Mining, equipment, technology
INDONESIA EV Indonesian exports to Australia. and services (METS) also offers
PA R T N E R S H I P Additional exports of vehicles potential. Australia is already a
to Australia using traditional successful supplier of METS to
The report has reviewed the combustion engines may also be Indonesia. With Indonesia’s ban on
industrial policies that have feasible, noting that Thailand is raw mineral ore exports, this means
supported the take-off of the now the largest source of Japanese a significant interest in Australia’s
Indonesia nickel processing industry brand vehicles to Australia – which
capability in mining and exploration
and how it is laying the foundations is already a multi-billion-dollar
software, specialised equipment,
for an EV manufacturing industry. export industry in its bilateral trade. environmental management,
This section takes an overview of
workforce development and
several potential opportunities for MINING AND SERVICES consulting services.
cross-border trade and broader
commercial partnerships in With Indonesia’s EV ambition,
There may also be some niche
Indonesia’s EV development. there is a range of opportunities
opportunities in fields of work such
Indonesia’s EV developments will to collaborate in its development
as urban planning and consulting
create exciting opportunities for by international partners including
related work on logistics and supply
Australian mining and education Australia. In the medium term,
management, including integrating
services. In 2020, Australia and based on some of the benefits
connectivity between various
Indonesia operationalised the accorded to Indonesia under the IA-
pieces of infrastructure and related
Indonesia-Australia Comprehensive CEPA for local content requirements
intermodal transportation networks.
Economic Partnership Agreement for EV exports to Australia,
(IA-CEPA). Powering advanced Indonesia may emerge as a critical
manufacturing is a priority area. supplier of EVs in the bilateral EDUCATION, SKILLS AND
Powering Indonesia’s EV batteries, trade. In terms of market access, TRAINING
manufacturing, and skills are areas both countries are still at very early
of early focus. stages of development, suggesting Education and wider workforce
room to grow and establish a skills development are areas of
As the largest automotive market commercial presence somewhat substantial opportunity. In the nickel
in South East Asia, the Indonesian liberated from long-established mines of Central Sulawesi, for
government has set an ambitious market leaders. instance, skilled labour remains an
goal to turn 20% of its vehicle ongoing issue. Finding employees
production into electric and The emergence of a substantial EV for technical positions is a
hybrid vehicles by 2025 - equal battery in Indonesia is another area significant obstacle. Companies are
to producing around 400,000 that offers a new opportunity for finding the education level of high
electric cars in that timeframe. Australian producers and exporters school students not up to standard,
The government also plans to of critical minerals, notably lithium requiring them to provide vocational
export 200,000 electric vehicles and cobalt. Western Australia education level training.
by 2025. In recent months both already produces more than half
the Indonesian Ministers of Trade of the world’s lithium supply, The Indonesian Government
and Industry have indicated that giving Australia an advantage in is investing in human capital
they would like Indonesia to meet the growing demand for lithium. development. Vocational education
some 10% of the Australian vehicle Along with lithium minerals exports, and training (VET) is a national
market, with a presumption that Australia’s capability in niche priority. Further, the new five-year
most of these vehicles would use areas such as the design and plan and its Making Indonesia 4.0 –
traditional combustion engines at manufacturing of batteries places an initiative to transform automotive
least in the early years. Vehicle it in an enviable position in the and other manufacturing sectors
exports alone would constitute a lithium-ion batteries value chain. – has earmarked USD30 billion
Electric vehicles: powering Indonesia’s next industrial growth 16ausindcentre.org
investment in VET. Upgrading other country. The program aims science technoparks, increase R&D
education and training facilities, to strengthen the people-to-people expenditure through its National
better connecting training centres links. Innovation Fund and strengthen
with businesses – as part of the science and technology capability
“software” of effective work- There should also be significant through increased research
related training programs – and opportunities for Australian consortium cooperation and
resolving training recognition and education and enterprises to institutional linkages internationally.
qualifications are some of the work with Indonesian partners in Local academic and research
quality improvements and policy both identifying and then meeting institutions will play an important
realignment underway. the critical skills-needs required role in Battery Electric Vehicle R&D
to enable these manufacturing capabilities. Some are developing
As Indonesia’s preferred partner activities. Developments in EV charging station technology and
in international education and will require new and highly skilled power electronics. Others are
vocational education, Australian workers. Skills will remain an developing electric motorcycle
providers should be well placed acute issue as more multinational innovations and batteries for fast
to advise and support programs companies consider establishing chargers.
to upgrade the workforce skills processing facilities and relocating
base needed to power these regional hubs or entire assembly Australian universities are
new industrial zones. The close lines in the country. doing world-leading research
alignment and familiarity among and prototyping of EV and
policymakers of both countries on battery technology. Last year,
matters related to qualifications RESEARCH AND Monash University researchers
recognition is an additional DEVELOPMENT commercialised the world’s
platform for building new forms most efficient lithium sulphur
For Indonesia to graduate from
of commercial cooperation on (Li-S) battery. The battery could
a “branch office” assembler
education and training. outperform current market leaders
to a major centre of activity, it
by more than four times, with the
will need to boost its research
The IA-CEPA offers several specific potential to enable EV to drive more
and development architecture.
opportunities to advance training than 1000km without refuelling.
Automotive is a key sectoral focus
and commercial partnerships. In Li-S batteries in cars and grids
and there are plans to develop skills
particular, there are a series of side could capture a more significant
and boost R&D. The government
letter agreements to the IA-CEPA part of the estimated $213 billion
will focus on strengthening industry-
including: value chain of Australian lithium.
education sector linkages, reforming
In the global automotive industry,
certification and accreditation
1) Skills Development that covers Australia is also a design/styling and
systems, boosting STEM (Science,
areas such as vocational education, research and development hub for
Technology, Engineering and Maths)
reciprocal skills exchange program, Ford, GM and Toyota in the Asian
graduates and fostering a culture of
work and holiday arrangement and region.
innovation and technology.
workplace skills training programs;
and There should be significant
Indonesia’s five year development
opportunities for Australian
plan, for instance, seeks to
2) Skills Development Exchange universities to work with Australian
increase the number of students
pilot project to give businesses commercial and Indonesian
and graduates in science and
from Australia and Indonesia the partners in both identifying
engineering. It also plans to
opportunity to send employees and upskilling the workforce
invest USD280 million to develop
to work up to six months in the in the EV skilled based sector.
Electric vehicles: powering Indonesia’s next industrial growth 17ausindcentre.org
Maintenance training, PhD training combustion engined vehicles in CONCLUDING COMMENTS
and application of science and Southeast Asia for decades. These
innovation are just some of the moves by Indonesia to promote the
specific areas in EV. All of these policy and industrial
development of electric vehicles
developments are significant and
and EV batteries in Indonesia may
A little speculation on regional most are quite closely related one
also be a game changer in terms of
tectonic shifts to the other. Intriguingly much
the regional centre of automotive
of this seems to be taking place
production especially as the world
For the Indo-Pacific region, these with minimal public discourse and
transitions from combustion engines
developments in Indonesia have to EV. exchange on the potential bigger
significant implications. picture. Much of the focus takes
Notable too is that the decades- place with snapshot discussions
Indonesia’s restriction of nickel long domination of the region of particular developments. These
exports has forced nickel processors by Japanese auto makers may have included the Job Creation
especially from China to invest face some new competition from Law, the 2009 Mining Law (which
directly in Indonesia to secure ambitious Korean automakers opened the path to restricting
access to these resources. The looking to grow their market mineral ore exports), the Battery
result has produced massive share. Within particular countries, EV regulation, the big nickel
increases in exports of processed notably Indonesia, which have long processing centres especially
nickel from Indonesia. This dynamic harboured ambitions to be more in Central Sulawesi, occasional
is reminiscent of the experience than a branch office assembler news headlines announcing new
of Japanese and Korean plywood of global producers, greater investments in EV batteries as well
makers that had to invest in competition between global makers as the inauguration of new pieces
Indonesia in the 1980s after the may offer more room to negotiate of infrastructure such as ports and
Indonesian Government banned greater productive and commercial toll roads.
the export of logs, and in doing so autonomy to determine the big
created a substantial export industry decisions on the future direction of Focusing solely on each of these
of plywood from Indonesia. their own automotive sector. episodic developments may
be limiting a capacity to step
Closing the geographic distance back to see the bigger canvas
between the mined nickel and its of very interesting and historic
processing plants has added to the developments in Indonesia.
efficiency and cost effectiveness of
the production centres in Indonesia; These developments are having
no doubt helping this product to important implications for Indonesia
reach international markets for now but also hold promise to have
less than that processed in those a solid impact for Australia well
countries. towards the middle of the century.
Many international automakers,
especially Japanese, have seen
Thailand as the preferred centre
for manufacturing traditional
Electric vehicles: powering Indonesia’s next industrial growth 18ausindcentre.org
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