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Indonesia could be the ‘gateway’ to EV investments in ASEAN

by Janessa Lee

Indonesia’s EV-friendly policies have not only attracted global investors to the country but also have the potential to boost investments in the broader Southeast Asian automotive industry. The country’s abundant reserves of copper, nickel, cobalt, and bauxite, which are essential materials for electric vehicle (EV) batteries, make it an attractive destination for manufacturers in need of these resources.

Indonesia has banned the export of certain metals and minerals to draw investors and manufacturers to its shores. With 22% of the world’s nickel reserves, the country is the largest exporter of this crucial element. It aims to leverage its resource riches to become a key global supply chain hub for EVs. The government has courted the likes of Tesla, hoping to transform its natural resources into economic growth.

The goal of becoming a global EV battery hub has garnered substantial support in recent years. Automakers such as Toyota and Hyundai have made billion-dollar investments to expand EV production facilities in Indonesia. A 2022 ASEAN investment report highlighted EV battery production as a significant share of foreign direct investment in the region between 2019 and 2021, particularly in Indonesia, Malaysia, and Thailand.

However, Indonesia still faces challenges in boosting vehicle production. Nishita Aggarwal, an automotive analyst at EIU, suggests that it will be challenging for Indonesia to replace Thailand as a regional vehicle production hub due to Thailand’s well-established export-oriented automotive industry. Additionally, lower-cost producers like Vietnam and the Philippines pose competition.

Nonetheless, the growth of Indonesia’s EV sector could have a halo effect on its neighbors. By providing access to essential materials for EV batteries, Indonesia could attract more investment and accelerate the adoption of electric vehicles across ASEAN countries. According to a report by Maybank, this could help the region embrace EVs faster and more cost-effectively.

While Indonesia’s natural resources play a vital role in building ASEAN’s competitive EV ecosystem, investors are likely to view the region as a whole. Bakrie & Brothers CEO Anindya Novyan Bakrie suggests that companies will consider ASEAN as a region for producing EVs, combining forces and leveraging different strengths and expertise to benefit the entire EV ecosystem.

Other Southeast Asian countries, like Malaysia, offer niche product mixes of high-tech goods in the automotive industry’s digitalization era. BMI’s Koketso Tsoai notes that Indonesia will play an outsized role in the upstream sector of the EV supply chain within ASEAN. However, its dominance in this area can complement the expertise of other countries in the region, further strengthening the overall EV ecosystem in Southeast Asia.

In conclusion, Indonesia’s EV-friendly policies, along with its rich reserves of crucial materials, have attracted global investors and have the potential to boost investments in the Southeast Asian automotive industry. By leveraging the strengths and resources of different countries in the region, ASEAN can accelerate the adoption of electric vehicles and establish itself as a competitive player in the global EV market.

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