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"During the third quarter of 2023, 3.7 million units of EVs were sold globally, making up 18% of total passenger vehicles in the world."
During the third quarter of 2023, 3.7 million units of EVs were sold globally, making up 18% of total passenger vehicles in the world. In 2024, global EV sales are expected to reach 16.7 million units. In China alone, it has been estimated that EV sales grew by 38% to reach 9.49 million units, and this strong growth for electric vehicles is echoed across the Asia Pacific region. The International Energy Agency (“IEA”) considers Southeast Asia to be the fastest growth area for electric vehicles and EV charging infrastructure in 2023 and beyond, including in Indonesia and Singapore.
Indonesia
Indonesia has demonstrated a clear commitment to increasing the use of EVs across the country. President Joko Widodo announced the country’s commitment to achieving two million electric vehicles on the road by 2025, with 600,000 units of electric cars and buses to be produced domestically by 2030. Indonesia is rich in copper, nickel, cobalt and bauxite — materials essential for the manufacture of EV batteries.
Both public and private entities are actively involved in the deployment of charging stations. For example, state-owned utility company Perusahaan Listrik Negara (“PLN”) has launched a number of pilot projects to establish EV charging networks across the country. Meanwhile GoTo, the country’s leading ride-hailing company, has introduced electric vehicles into their fleet, and has committed to investing in EV charging infrastructure to support this move. Public operators such as Transjakarta have planned a significant augmentation to electrify their bus fleet. Monumentally, the Indonesia Battery Corporation was formed in 2019 by PLN, Pertamina (state-owned oil and natural gas corporation), Inalum (state-owned company specialising in aluminium smelting) and Antam (Indonesia’s largest nickel producer) to support the nation’s goal of becoming a global EV producer.
The country’s aim to become a global EV battery hub has also received international support in recent years with Asian car manufacturers such as Toyota and Hyundai making billion-dollar investments to expand EV production facilities in Indonesia.
At a policy level, in 2019 the Presidential Regulation No. 55 of 2019¹ (the “Regulation”) was introduced. The Regulation acts as a framework under which legislation will be enacted, which aims to encourage the development of electric vehicle infrastructure and encourage and increase demand for electric vehicles. The government has, since then, continued to issue regulations in support of the development of both battery-run EVs (“BEVs”) – including local domestic requirements, local content requirements, importation and domestic manufacturing requirements to testing, conversion of fuel-powered motorcycles to BEVs and environmental protection from battery wastes – and BEV infrastructures.
The Regulation was later amended in 2023 (with further clarifying provisions issued by the Minister of Investment/Head of the Investment Coordinating Board), arguably to attract more investments into Indonesia’s EV sector, as these amendments relax certain criteria (e.g., extended deadlines for fulfilment of domestic component requirements² in EV manufacturing) and greater incentives for importations of fully assembled EVs, as well as for domestic assembling of EVs.
"The country's aim to become a global EV battery hub has also received international support in recent years with Asian car manufacturers such as Toyota and Hyundai making billion-dollar investments."
As part of its strategy, the Indonesian government is seeking to directly incentivise supply through fiscal stimulants – most notably by the introduction of two Ministry of Finance regulations which seek to (i) promote innovation in the industry through gross income tax deductions for qualifying research and development projects³ and (ii) encourage investment through corporate income tax holidays for qualifying projects.⁴ On the demand side, Government Regulation No. 37 of 2019⁵ relieves the imposition of luxury-goods sales tax on certain categories of electric vehicles. This demonstrates the Indonesian government’s dedication to encouraging consumers to buy electric over petrol vehicles.
Policymakers also recognise that change cannot be driven by private consumers alone, and further legislation has been introduced that seeks to facilitate electrification in the public transport space.⁶ Indonesia has banned exports of certain metals and minerals in a bid to draw investors and manufacturers in need of those materials to its shores. This is significant as Indonesia is reported to be the world’s largest exporter of nickel, accounting for 22% of global reserves.
Singapore
Singapore, which already boasts one of the most sophisticated EV charging networks in the region, continues to gain pace in the deployment of policies geared towards improving the infrastructure required to support widespread EV use.
As part of the Singapore Green Plan 2030, the government aims for all vehicles to run on cleaner energy (including electric, hybrid, or hydrogen fuel cars) by 2040. Collective efforts by the Ministry of Trade and Industry and the Land Transport Authority (“LTA”) include narrowing the purchase cost of ICE (internal combustion engine) vehicles and EVs, expanding the network of charging points and reviewing regulation of EV chargers.
The Electric Vehicles Charging Act 2022 (“EVCA”) came into effect at the end of 2023. The legislation seeks to regulate the expansion of the country’s EV charging infrastructure, setting out a licensing regime for providers and homogenising the requirements for all EV chargers. Key features of the EVCA are that:
"As part of the Singapore Green Plan 2030, the government aims for all vehicles to run on cleaner energy by 2040."
- EV chargers must subscribe to the national charging model;
- only EV chargers that are type-approved by the LTA, and labelled as such, are permitted to be supplied, installed or certified as fit for charging any EV in Singapore;
- operators of EV chargers must be licensed to provide EV charging services or operate EV charging stations, and to comply with and be subject to licensing requirements and conditions, including as to maintain service uptime of chargers in their network, holding public liability insurance to cover their operations and providing charging-related data to the LTA;
- developers of certain types of building are mandated to include EV charging infrastructure in their plans; and
- management corporations of strata-titled developments are able to pass resolutions to install EV charging infrastructure and to enact by-laws on the use of parking lots for EV charging only by simple majority only.
Singapore demonstrates a clear commitment to facilitating the smooth transition to electric vehicle usage in both the private and public sectors. In November 2023, the LTA awarded contracts for 360 electric buses and the installation of EV charging stations in three bus depots in November 2023, with expectations to deploy both the buses and charging stations in December 2024.
Challenges for the EV market
Despite eager rollouts of regulations in both countries, there is a need to ensure that the existing policies cater to EV manufacturing cycles, which are longer than the office-terms of governments of both countries (four years in Indonesia and five in Singapore).
In practice, Singapore’s legislative framework and government approach to policymaking allow for much more efficient formulation and implementation of novel EV policies. Indonesia’s legislation historically suffers from an excessive number of regulations, incongruencies and delayed implementation and enforcement. With many implementing regulations yet to be issued in clarification of the existing EV laws, how much they can help realise Indonesia’s EV ambitions remains to be seen.
In both countries, EVs remain more expensive than petrol cars – cementing price as one of the main barriers to growth in the sector. Singapore, however, enjoys a higher level of affluence and growing public awareness and market acceptance of EVs, driving a more prevalent switch from petrol-cars to EV in the country by car owners. Nevertheless, demand for EVs in Indonesia appears to be growing, with revived consumer spending, a growing middle class and a strong demographic of millennials and Gen Z consumers who value sustainability and are increasingly searching for EV solutions.
"An established EV ecosystem in the region will offer new green business-building potentials and more importantly, the means to achieve climate goals."
That being said, the lack of availability of EV charging points can act as a deterrent to potential consumers, who are said to suffer from “range anxiety” – the fear of driving an electric car and running out of power without any accessible EV charging options. Considering the sheer difference in geographical layout of the two countries, Indonesia shoulders the challenge of ensuring not only the existence of and accessibility to EV chargers in more remote areas, but that all EV chargers across its five islands have sufficient access to the power grid
If governments and policy makers wish to effectively enforce EV regulations, the main challenges are three-fold:
- to consider the sustainability and longevity of such regulations;
- to make electric vehicles more affordable to incentivise consumers; and
- to improve EV charging infrastructure to support electric vehicle adoption and usage.
Conclusion
Public policy in Indonesia and Singapore is indicative of the commitment to increasing electric vehicle use in the region. Both governments have set out electric vehicle targets, offered consumer incentives and commenced development of EV charging infrastructure. Through a combination of demand and supply incentives, the proportion of EVs is sure to increase. Private investors and developers should take note of these policies, which are instrumental to Southeast Asia’s green energy transition, and position themselves to take advantage of opportunities in the EV industry, which exist across the entire value chain.
To achieve their respective EV ambitions however, Indonesia and Singapore must go beyond merely promulgating regulations. The main challenges to establishing a solid EV market include the sustainability of EV regulations, the affordability of EVs, and the novelty of EV infrastructure. Indonesia in particular, will need to address domestic concerns to effectively attract and deploy foreign investments.
Poised for growth, the Southeast Asia EV market can be further accelerated through coordination between countries within the region. An established EV ecosystem in the region will offer new green business-building potentials and more importantly, the means to achieve climate goals. It is imperative that Indonesia and Singapore seize today’s opportunities to shape its future energy ecosystem.
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footnotes
[1] Presidential Regulation No. 55 of 2019 on the Acceleration of Battery-Run Electric Vehicle Programmes for Road Transportation, as amended by President Regulation No. 79 of 2023.
[2] In promoting the development of local industries, the Regulation requires EVs manufactured in Indonesia to maintain a domestic component ratio (e.g., EV manufacturers to source raw materials from Indonesia and/or employ domestic labor in the manufacturing process).
[3] Ministry of Finance Regulation No. 153/PMK.010/2020.
[4] Ministry of Finance Regulation No. 130/PMK.010.2020.
[5] Government Regulation No. 73 of 2019 on Taxable Luxury Goods in the Form of Motor Vehicles Subject to the Imposition of Luxury-Goods Sales, which was later amended by Regulation No. 74 of 2021.
[6] Presidential Instruction No. 7 of 2022 on Use of Battery-Run Electric Vehicles as Official Operational Vehicles for the Central and Regional Government Institutions.
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