All Charged Up: Indonesia Electric Vehicles

Indonesia electric vehicles
Sector outlook - Overweight
Sarina Lesmina, CFA

Head of Indonesia Research
sarina.lesmina@clsa.com
+62 21 5088 7820
Norman Choong, CFA
+62 21 5088 7827
Handy Noverdanius
+62 21 5088 7831
Chelene Indriani
+62 21 5088 7812
23 March 2021
Indonesia
Autos/materials
Antam ANTM IJ
Rec BUY
Market cap US$3.8bn
3M ADV US$144.3m
Price Rp2,250
Target Rp4,000
TSR 79%
Astra ASII IJ
Rec O-PF
Market cap US$16.2bn
3M ADV US$25.7m
Price Rp5,775
Target Rp6,100
TSR 8%
Vale Indonesia INCO IJ

Rec BUY
Market cap US$3.1bn
3M ADV US$20.2m
Price Rp4,500
Target Rp8,600
TSR 91%
All charged up
Roadmap to full supply chain and emobility
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Contents
Executive summary ......................................................................................................... 3
Investment thesis ............................................................................................................ 4
Laying out the EV strategies ........................................................................................ 10
Policies and subsidies analyses ................................................................................... 16
Development of EV battery value chain .................................................................... 38
How to play the theme ................................................................................................. 53

See how Indonesia fares
in the fintech space
Company profiles
Antam ............................................................................................................................. 65
Astra................................................................................................................................ 73
Vale Indonesia ................................................................................................................ 81
All prices quoted herein are as at close of business 19 March 2021, unless otherwise stated
EV essentials
Find CLSA research on Bloomberg, Thomson Reuters, FactSet and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com
2 sarina.lesmina@clsa.com 23 March 2021

Executive summary Indonesia electric vehicles
All charged up
Plugging in Sitting on the world’s largest reserves of nickel, a key raw material of electric vehicle
(EV) batteries, Indonesia is plugging in to join the global electric car network. The
government has launched aggressive incentives to boost early adoption and lure
investment. Its ambition is to form a complete supply chain with nickel mining,
downstream processing, battery and auto manufacturing. Automakers such as
Hyundai and Toyota have committed to build green autos locally and we believe
Astra, Antam and Vale Indonesia would benefit most from the bold initiative.
Laying out EV strategies The government kick-started its plan to build an integrated EV industry ecosystem
in 2019. It has launched tax incentives to boost demand for EVs and supportive
measures to back local production of batteries and vehicles. Its aim is that hybrid
EV (HEV), plug-in hybrid EV (PHEV), battery EV (BEV) and fuel cell EV (FCEV) will
make up 20% of all locally-made vehicles by 2025, and 30% by 2035.
Building a demand-supply To encourage early EV adoption, government incentives are emission-based. For
virtuous cycle example, it has reduced the luxury goods tax for BEVs to zero. We believe such
sweeteners will remain in place until local production commences, which could
happen as early as 2023-24. EV adoption should really take off when domestic
production and infrastructure, ie, charging stations, are ready, as both can lower the
cost of ownership. To speed things up, private sectors firms are being invited to
help build charging and battery-swap networks.
Nickel reserve is key to Indonesia has turned itself from an ore miner to a downstream nickel processor and
battery making key iron and steel exporter in the last decade, significantly reducing its current
account deficit. To further its downward movement on the supply chain, it has
attracted major global players to commit investment of US$30-35bn in EV battery
production, some of which has already been realised. New battery precursor plants
are slated to come online in 2021-22. With ample raw materials, infrastructure
support and a successful track record, we believe the country will become a
competitive producer of EVs and EV parts in Asia.
How to play the theme Outperform-rated auto distributor Astra should benefit from Toyota’s dominance in
the hybrid segment. Toyota is also catching up on BEV technology. Meanwhile,
BUY-rated Antam and Vale Indonesia, both already engaged in mining EV battery
materials, should enjoy advantages in setting up EV production. On the macro side,
we expect strong global demand for EVs to help reduce the current account deficit
and create jobs in Indonesia.
The government wants Government target for BEV 4-wheeler

low-emission vehicles to (unit) (%)
450,000 BEV sales (LHS) BEV as % of car sales 25
make up 20% of new car
sales by 2025 400,000
350,000 20
300,000
BEV to be >50% of low- 15
250,000
emission new car sales
200,000
10
150,000
100,000 5
50,000
0 0
20 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F
Note: Assuming a 10% Cagr for total car sales in 2023-2030. Source: PLN, CLSA
23 March 2021 sarina.lesmina@clsa.com 3

Investment thesis Indonesia electric vehicles
Actions for emobility and EV value chain

Aspiring to become an electric vehicle (EV) hub for the Asean market, Indonesia has
A 10-year plan to build
an integrated EV kick-started a 10-year plan to build an integrated industry ecosystem with
industry ecosystem Presidential Regulation No 55 of 2019 - the first umbrella law on the acceleration
of BEV for road transport. We believe the government’s move is logical given its
rich mineral resources - having 25% of all global nickel reserves; its successful
experience in nickel downstream processing; and strong global demand for EV.
Two-stage EV framework
The roadmap contains two milestones. The first milestone is to have 20% of locally-
Two key milestones
produced vehicles being low-carbon-emission vehicles (LCEV) by 2025. The second
target is to have 30% of domestic vehicles being low-carbon-emission vehicles
(LCEV) by 2035.
Government has To achieve these targets, the government has mapped out strategies to encourage
strategies to boost EV early adoption of EVs, hence, boosting demand; as well as to support supply chain
demand and build creation which include infrastructure building and technology development for EV
supply chain and batteries productions.
Indonesia’s roadmap to build an EV ecosystem in two phases
2020-2025 2025-2035
Technology readiness
Perpres No 55 Total cost of ownership Infrastructure
(vehicle production, supply
2019 (price of BEV) readiness
chain and core technology)
Marketing initiatives
(demand creation)
Infrastructure initiatives
(Renewable and sustainable electricity supply)
Local production and technology enhancement (supply-side support)
Building up knowledge on battery-based electric vehicle (BEV)
Source: Government of Indonesia
New tax regime to On the demand side, a new emissions-based tax regime effective from 16 October
encourage early 2021 will replace the existing luxury tax scheme. In addition, there will be incentives
adoption of EV in the form of ownership taxes for purchasing BEVs on a regional basis.
On the supply side, the government has promised fiscal and non-fiscal incentives
Incentives for
automakers who make for automakers who are able to produce a certain proportion of their EVs locally.
EV locally These incentives will also extend to the whole value chain, including private
companies who build supporting infrastructure.
Multi-channel policy support

The government has rolled out solid measures in various aspects of supporting the
industry, demonstrating its resolution to build a comprehensive EV value chain.

Thanks to the government’s efforts, more EV models have hit the market in 2020.
More EV options are
available in the market, However, there are still limited EV options in the market and prices are much higher
but prices are still high than those of mass-market internal combustion engine (ICE) vehicles because they
are imported goods.
Meanwhile, the government has learned from other countries’ success stories that
Demand incentives are
needed to boost early demand incentives are needed to boost early adoption at least until local production
adoption is ready.
China and Norway are two examples. In Norway, BEV sales rose from 16% of car
sales in 2016 to 54% in 2020. China is now the world’s largest EV market.
Meanwhile, Singapore has recently launched an electric vehicle early adoption
incentive (EEAI) programme which will be effective from January 2021 to December
2023. Separately in India, EV buyers get tax advantages, but hybrids still fare better
due to cheaper prices.
In February 2021, the Indonesian government revised again the luxury tax regime,
Zero down payment
requirement for BEV via Government Regulation PP No. 73 2019, widening the gap between taxes for
financing since Sep 2019 hybrid and BEVs in order to boost BEV adoption. The central bank has also since
mid-September 2019 lowered the minimum down payment requirement for BEV
financing to zero. We believe there will be more incentives because EV is one of the
government’s key focuses.
Luxury tax rates for various car types in different stages Hyundai Ioniq hybrid was launched in Indonesia in Nov 2020
25 (%)
20
20
15
12 15
10 8
8 8
10
5
5 6
0 0 2
0
BEV
(PP 73)
(PP 73)
(New-stage 1)
(New-stage 2)
(New-stage 1)
(New-stage 2)
ICE
PHEV
HEV
PHEV
PHEV
HEV
HEV
Note: Stage 1: Oct 2021. Stage 2: When BEV are produced locally or meet Source: Company
local content requirement. Source: Government of Indonesia
Since the government has begun providing incentives to automakers producing EVs or
Toyota will invest
US$2bn for full EV
part of their EVs locally, we have seen more investment in domestic auto production.
production in 2023-24 For example, Hyundai is setting up a plant with production scheduled to start by early
2022. The facility will first produce ICE vehicles and only switch to make EV later.
Hyundai was the first automaker to launch imported BEV at relatively-less-expensive
prices in Indonesia. Meanwhile, Toyota sold most EVs in Indonesia and has committed
to invest US$2bn in the next three years for full EV production in 2023-24.
A survey conducted by Japan’s Rakuten shows access to charging is the second

Gov’t offers incentives
to private sector to most important factor auto buyers would consider before they purchase an EV after
build charging network tax rebates/subsidies. The government has set an ambitious target to build a
network that can fulfil the daily charging needs of more than twice the estimated
number of BEV charged/day in 2030. To speed things up, it will offer incentive to
the private sector to set up charging stations.

Gov’t target of 4W BEV sales EV charging station vs petrol station roadmap

Gov’t targets more than 500,000 (unit) BEV sales (LHS) (%) 25 9,000 No. of EV charging station (SPKLU)
20% of 4W car sales BEV as % of car sales
8,000
No. of petrol station (SPBU)
being BEV by 2030 400,000 20 7,000
6,000
300,000 15
5,000
4,000
200,000 10
3,000
100,000 5 2,000
1,000
0 0 0
20 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F 2019 2020 21F 22F 23F 24F 25F
Note: Assuming a 10% Cagr for total car sales in 2023- Source: Pertamina, Ministry of Energy, Mineral, and
2030. Source: PLN, CLSA Resources
Indonesia has enough electricity capacity for EV adoption. It currently has c.50%
Indonesia has about
excess capacity which is more than enough to cater to demand from EVs in the
50% excess electricity
capacity medium term. To encourage EV adoption, state-owned electricity company PLN is
providing discounts for home charging in the evenings. This also serves as a
temporary solution before the charging station network is large enough.
In the two-wheeler space, battery swap programmes are the current charging solution
Battery swap program
given the shorter driving range and high battery cost (as percentage of price). It is also
as charging solution for
two-wheelers easier to change battery in a two-wheeler than in a four-wheeler. The government is
working with Asosiasi Industri Sepeda Motor (AISI), the country’s two-wheeler
association, to develop affordable batteries and an efficient battery leasing/swapping
system. It has also started to install battery swap systems in minimart chains. According
to Astra management, the government is working on standardising EV batteries for
two-wheelers to improve efficiency and lower costs of ownership.
Electricity capacity utilization rate Gov’t target of 2W BEV sales

Gov’t targets more 53 (%) (m) 2W BEV sales (LHS) (%)
2.5 30
than 25% of 2W car 2W BEV as % of sales
52
sales being BEV by 2.0 25
2030 51 20
1.5
50 15
1.0
49 10
48 0.5 5
47 0.0 0
2017 2018 2019 3Q20 20 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F
Source: PLN Note: total 2W sales at 4% Cagr in 2024-2030.

Source: PLN, CLSA
There are more than 10 brands of two-wheeler EVs available in the market, however,
sales are still behind ICE two-wheelers. Online ride-hailing giants Grab and Gojek, as well
as the country’s largest taxi company Blue Bird are also testing their own EV models.
Battery swap station in Jakarta for 2-wheelers Bluebird’s EV taxi at charging point in depot
Grab started operating
2W BEV; Gojek’s in
trial phase
Bluebird has started

investing in EV taxi
Source: Company Source: PLN, CLSA

Meanwhile, the government has started planning a battery recycling programme

Gov’t plans battery
recycling scheme with with Brunp-owned Indonesia Puqing Recycling Technology to build a facility in
Puqing Morowali. The programme is now in import licensing process. State-owned
enterprises may participate in the long run.
Unless the government or automakers provide more subsidies, EV cannot compete

EV ownership costs are
18-28% higher than ICE with ICE vehicles in terms of ownership cost, according to Bluebird’s assessment
and our estimate. EV ownership costs are 18-28% higher than ICE and we estimate
it would take six to nine years for EV ownership costs to be comparable to ICE.
Nevertheless, we expect EV ownership cost would reach an inflection point once

production is sufficiently localised and the whole sector achieves economies of
scale. The government may then start phasing out subsidies like what we have seen
in China, which however has extended subsidies and tax breaks for EV by two years
to the end of 2022 due to the pandemic. Although we believe the Indonesian
government’s target to have 20% of new four-wheeler sales being EVs by 2025 is
ambitious, the country is at least heading in the right direction.
EV sales as % of 4W sales BEV sales rose to 54% of all car sales in Norway
Indonesia’s target to
have 20% new 4W 60 (%)
54.0
(%) BEV PHEV HEV Petrol only Diesel only
sales being EVs 100
50 90
by 2025 80
40 70
60
30 50
40
20 13.7 30
9.4
20
10 5.5
0.1 0.1 10
0 0
India Indonesia China Thailand Netherland Norway 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Governments Source: Norwegian Road Federation (OFV)
Development of EV battery value chain

Indonesia has intended to leverage on its rich natural resources and move up the
Moving up along the
nickel value chain value chain, especially in nickel mining, since a decade ago. The government had
thus put in place a mineral ore export ban in 2014, but had partially lifted the
restriction in 2017 to allow domestic miners to raise funds to increase smelting
capacity. The reinstating of the ban in January 2020 sent a strong signal that the
authority wanted to refocus on value-added products.
The ban has accelerated Indonesia’s nickel downstream industrialisation and led the
Opened up more
investment formation of strategic ventures in stainless steel and EV battery productions.
Preliminary data show that key players such as Tsingshan, Huayou Cobalt and
Contemporary Amperex Technology (CATL) have committed investment of US$30-
35bn over the next 10 to 15 years. Part of those investment have already been
placed in stainless steel and class-2 nickel productions. Meanwhile, China’s
Tsingshan Holding Group runs the largest integrated iron & steel plant in the
country.
A few HPAL projects are slated to come online in 2021-22. Given access to raw
A few HPAL projects
are slated to come materials, infrastructure support and track record, we expect the country would be
online in 2021-22 able to produce battery materials at competitive costs.

EV battery value chain and development status of manufacturing functions in Indonesia

Cell component Battery cell Battery pack EV/ESS/Electronics Recycling/
Mining Refining
production production assembly manufacturing second life use
Lithium
Lithium ore/salt Electrolyte
carbonate
Graphite Graphite Anode
Consumer
Nickel ore Nickel sulfate electronics
Battery module/
Cobalt ore Cobalt sulfate Cathode Battery cell Electric vehicle Spent batteries
pack
Manganese
Manganese ore
sulfate
Electric storage
Bauxite Aluminium Battery

Current collector management
system
Copper ore Copper
Development status of manufacturing functions in Indonesia
Electronic
Separator Not available/
components Available To be developed
no plan yet
Module/
Cell housing
pack housing
Source: CLSA
To support the various HPAL projects, the government has simplified nickel smelting
Issuance of nickel ore
licensing process and introduced nickel ore guiding price in mid-2020, which was proven
guiding price is a game
changer
to be a game changer because it ensures limonite ore prices are competitive.
The newly formed PT Industri Baterai Indonesia, a state-owned EV battery holding

company, is planning for co-investment into EV battery related downstream businesses in
the longer run. Government is expected to announce more details by the end of the year.
Despite Indonesia’s could potentially double its nickel pig iron supply by 2023, a
Global nickel demand
continuous decline in China’s output given lack of raw materials should offset the
and supply remain
balanced
supply surge. A rising EV-driven demand for nickel would also help maintain the
supply-demand balance.
Surplus/deficit of global refined nickel market Nickel demand from EV

EV-driven nickel 300 ('000 tonnes) 500 ('000 tonnes)
demand could see a
30% Cagr in 2020-25 200 400
100 300
0 200
(100) 100
(200) 0
2014 2015 2016 2017 2018 2019 2020 21CL 22CL 2018 2019 2020 21CL 22CL 23CL 24CL 25CL
Source: CLSA, Wood Mackenzie Source: CLSA
Despite higher nickel prices, the average cost of producing battery (per kWh) is falling,
Battery R&D
thanks to economies of scale. Advancement and competition in EV battery R&D and
advancement and
rising EV adoption will continue to lower battery costs and EV prices. CLSA’s head of Asia
rising EV adoption will
lower EV prices energy research Ken Shin predicts EV-ICE price parity by 2024, with bull case by 2022.
Moreover, he predicts nickel-rich batteries would remain the mainstream in the
foreseeable future.
How to play the theme

Astra International dominates the ICE auto market with 50% share in the four-
Astra dominates both
wheeler (4W) segment and 79% share in the two-wheeler (2W) market. Major
ICE and EV segments
brands distributed by Astra include Toyota and Daihatsu in 4W, as well as Honda in
2W. Toyota is at the forefront of hybrid technology globally and catching up on BEV
development. Having launched several new models in 2020, Astra controls 79% of
EV sales in Indonesia, mainly with imported Toyota hybrids.

Since Toyota has pledged to invest in local EV production, future made-in-Indonesia

Astra is working with
Toyota EV should have advantage in pricing. With its strong dealership network,
gov’t on 2W EV
after sales services and brand recognition, Astra is well-placed to benefit from the
feasibility trials
government’s initiation and various supportive measures. The company is also
collaborating with the government on 2W EV feasibility trials.
We maintain our Outperform rating for Astra and target price at Rp6,100. We use a
sum-of-the-parts valuation of its business profits with a forward multiple of 17x, which
is its pre-Covid19 historical mean. We apply a 26% discount to the valuation taking into
account Covid-related uncertainties and factoring in conglomerate discount.
Astra’s 4W sales by brand Low carbon emission vehicle (LCEV) 4W sales

Toyota dominates both Others
Isuzu BMW Hyundai
ICE and LCEV 4W 6% 0.1%
0.5% 9%
markets Nissan Lexus
12% 8%
Mitsubishi
0.5%
Daihatsu
34%
Toyota
60%
Toyota
71%
Source: Company Note: Tesla’s sales are not captured by Auto Association
(Gakindo). Source: Gakindo
Antam and Vale Indonesia are key beneficiaries given they both have exposure to EV
battery materials production. Antam should see multi-year growth as we expect its ore
sales to soar with higher Indonesia NPI output and commencement of HPAL projects.
We maintain our BUY rating and Rp4,000 target price for Antam. The valuation is
based on a 14x EV/Ebitda, close to 1sd above the stock’s five-year average, applied
We maintain our BUY to our 2022 forecasts. This multiple reflects our view that Antam’s profitability
rating and Rp4,000 would be structurally higher than before in the foreseeable future, with our 22CL
target price for Antam 21% Ebitda margin forecast representing an all-time high, comparing with a
previous peak of 14% in 2012. We also believe this improvement is set to continue
under our nickel price forecast of 18.5-19k/t for 21-22CL and a mid-long term
forecast of US$20k/t, driven by growing demand for EVs, economic recovery, as
well as a soft US dollar that would support US dollar-denominated nickel prices.
Vale is a good price proxy of nickel as it is a highly efficient producer for class-1
We maintain our BUY nickel. We maintain our BUY rating and target price of Rp8,600 for Vale, based on
rating and target price
a 10x EV/Ebitda multiple, close to 1sd above the stock’s 10-year average, applying
of Rp8,600 for Vale
to our 2022 forecasts. Similar to Antam, we forecast a structurally higher
Indonesia
profitability scenario for Vale. 22CL 48% Ebitda margin is above the previous high
of 40% in 2014 and closing in on the 42-54% range recorded over 2009-10.
Nickel downstream industrialisation has narrowed Indonesia’s iron and steel trade
deficit substantially. From close to nothing in 2014-16, Indonesia’s share of global
finished nickel/stainless steel climbed to 25/7% in 2020. It has helped narrow the
country’s current account deficit, bring foreign direct investment and create jobs.
Indonesian EV players valuation

Company Code Mkt cap Rec Price Target Upside Div yld (%) TSR PE (x) ROE (%)
(US$m) (Rp) (Rp) (%) 21CL (%) 21CL 22CL 21CL
Astra International ASII IJ 16,247 O-PF 5,775 6,100 5.6 2.8 8.4 12.5 9.8 11.6
Antam ANTM IJ 3,757 BUY 2,250 4,000 77.8 0.9 78.7 20.1 16.0 13.3
Vale Indonesia INCO IJ 3,107 BUY 4,500 8,600 91.1 0.0 91.1 16.0 12.0 8.7
Source: CLSA

Section 1: Laying out the EV strategies Indonesia electric vehicles
Laying out the EV strategies

Indonesia wants to build a With the issuance of Presidential Regulation No. 55 in August 2019 (Perpres 55
domestic EV ecosystem 2019), the Indonesian government initiated the electric vehicle roadmap for the
next 10 years. The national aspires to build a domestic EV ecosystem with a
complete supply chain and an EV consumer market, and become an EV production
hub in for the Asean market.
Figure 1
Indonesia’s electric vehicle roadmap

2020-2025 2025-2035
Technology readiness
Perpres No 55 Total cost of ownership Infrastructure
(vehicle production, supply
2019 (price of BEV) readiness
chain and core technology)
Marketing initiatives
(demand creation)
Infrastructure initiatives
(Renewable and sustainable electricity supply)
Local production and technology enhancement (supply-side support)
Building up knowledge on battery-based electric vehicle (BEV)
To have 20% of locally- The plan contains two milestones. The first milestone is to have 20% of locally-produced
produced vehicles being vehicles being low-carbon-emission vehicles (LCEV) by 2025. The second target is to
LCEV by 2025 have 30% of domestic vehicles being low-carbon-emission vehicles (LCEV) by 2035.
On the demand side, the government plans to provide incentives to encourage early
adoption of EV, mainly imported complete build-up (CBU) from overseas before
local production commences.
Local EV production in CKD On the support side, the government intends to develop local EV production in the
form in the early stage complete knocked-down (CKD) form in the early stage, exporting unassembled EV
parts and batteries to the Asean market. Its plan is to work on infrastructure
building, as well as getting the technology ready for local production.
Figure 2
Targets for low emission vehicles (in Ministry of Industry regulation No. 27 2020)
Description 2025F 2030F 2035F
4-Wheeler or more
Total production (m) 2.0 3.0 4.0
LCEV % (Low Carbon Emission Vehicle) 20 25 30
LCGC % (Low Cost Green Car) 20 20 20
Total sales (m) 1.69 2.10 2.50
LCEV sales (m) 0.34 0.53 0.75
2-Wheeler and 3-Wheeler
Total production (m) 8.8 9.8 10.8
% Electric 20 25 30
Total sales (m) 7.70 8.40 9.00

Focus is on BEV While the above target shows that LCEV, which includes hybrids and hydrogen-
base EVs, is to form 20% of sales, government’s focus is more on battery EV (BEV)
as it is deemed to be the mainstream in the future. We will discuss this more in
section three of this report.
Emission-based luxury tax Government regulation (PP No. 73 2019) issued on 16 October 2019 will change
regime effective from current luxury tax scheme that is based on engine size and vehicle type to include
16 October 2021 factors such as gasoline/diesel usage (km/l) and emission. The regulation will come
into effect on 16 October 2021.
Zero tax for BEV, The regulation will allow plug-in hybrid (PHEV), battery EV (BEV), fuel-cell EV (FCEV)
PHEV and FCEV to enjoy 0% tax (excluding 10% VAT). While for full hybrid with engine size up to
3,000cc, the tax rate will be 2-8%. Note that because the current regulation (PP No. 41
2013) calculate luxury tax based on engine size, no luxury tax is imposed on BEV.
LCGC no longer enjoys Under the new regime, low cost green car (LCGC) will no longer enjoy zero tax rate,
zero tax rate but instead be subject to a 3% tax rate. It is logical as arguably the LCGCs are not
particularly environmentally friendly. As to the impact on demand, we believe a 3%
tax rate - or c.Rp4.5m for a typical c.Rp150m LCGC - will still be tolerable as there
is a lack of option in this lowest segment of 4-wheeler. LCGC contributed to 19.6%
of total 4W sales in Indonesia in 2020, down from 22% in 2019.
Figure 3
New luxury tax scheme (effective from 16 Oct 2021, issued on 16 Oct 2019
Category Type Fuel (km/l) CO2 emission Engine volume (cc) (%) VAT (%)
Gasoline Diesel (g/km) <1,500 1,500-3,000 >3,000-4,000 ("PPN")
Passenger <10 persons >15.5 >17.5 <150 15 15 40 10
vehicle 11.6-15.5 13.1-17.5 150-200 20 20 50 10
9.3-11.5 10.5-13 >200-250 25 25 60 10
<9.3 <10.5 >250 40 40 70 10
>10 persons >11.6 >13.1 <200 15 15 25 10
<=11.6 <=13.1 >=200 20 20 30 10
Commercial Double cabin >15.5 >17.5 <150 10 10 20 10
11.6-15.5 13.1-17.5 150-200 12 12 25 10
<11.6 <13.1 >200 15 15 30 10
Program LCGC ("KBH2") >=20 >=21.8 <=120 3 na na 10
Full hybrid >23 >26 <100 2 2 20 10
>18.4-23 >20-26 100-125 5 5 25 10
>15.5-18.4 >17.5-20 >125-150 8 8 30 10
Mild hybrid >23 >26 <100 8 8 20 10
>18.4-23 >20-26 100-125 10 10 25 10
>15.5-18.4 >17.5-20 >125-150 12 12 30 10
Flexy Engine (E100/B100) 8 8 8 10
PHEV (plug-in hybrid), BEV (Battery EV), FCEV (Fuel cell EV) 0 0 0 10
Super car >4,000cc 95 10
Progressive tax scheme For internal combustion engine (ICE) 4W, luxury goods tax is progressive based on
based on CO2 emission and CO2 emission and fuel efficiency. For typical passenger cars excluding sedan from
fuel efficiency 1,500-2,500cc (<10 passengers), current tax rate is 10-20%. Under the new regime,
the range for passenger cars including sedan will become 15-20%.
Sedan as a separate luxury tax category will be abolished and lumped into passenger
vehicle. Under the current tax regime, tax rates for sedan are much higher than
other types of 4W, such as multi-purpose vehicle (MPV) and sport utility vehicle
(SUV) etc. Historically, tax rate for sedan is about 5% of car sales.

More than 90% of car sales Under the current tax scheme, luxury tax is between 0% and 75%. However, based
are subject to luxury goods on Indonesia Auto Association (Gaikindo)’s data, 98% of domestic car sales are in
taxes of up to 20% the low-to-medium size segment, subjecting to luxury taxes of up to 20%.
Figure 4
Current luxury tax (PPnBM) regime

Category Vehicle type Specification 2-wheeler (engine cc) 4-wheeler (engine cc)
251-500 >500 <=1,500 1,501 2,000 2,500 2,501 3,000 >3,000
Passenger cars LCGC (KBH2) Gasoline/diesel 0%
Sedan/station wagon Gasoline 40% 75%
(<10 passengers) 30%
Diesel 40% 75%
Gasoline 40% 75%
4x2 (<10 passengers) 10% 20%
Diesel 75%
Gasoline 40% 75%
4x4 (<10 passengers) 30%
Diesel 40% 75%
10-15 passengers 10%
>=10 passengers
>15 passengers 0%
Vehicle type Specification <=5 tonnes >5 tonnes
Commercial Single cabin 0%
vehicles Pick-up 0%
Double cabin 20%
Others 0%
Golf cars 50%
2-wheelers 60% 75%
Vehicles for snow, beach, mountain and the likes 60%
Trailers, semi-trailers and caravans 75%
Widening tax rate gap However, there has been a recent change in luxury tax (PPnBM) under PP No. 73
between PHEV/HEV 2019 for PHEV and HEV, widening the gap in tax rates between PHEV/HEV and
and BEV BEV. We will discuss further in section two.
Discounts on ownership Apart from the relaxation on luxury tax (PPnBM) for EV, the Ministry of Internal
taxes for BEV affairs also issued a regulation (PP No. 8 2020) on 31 January 2020 pertaining to
annual vehicle/road tax (PKB) and ownership tax (BBNKB). Every purchase of
vehicle is subject to BBNKB. Both PKB and BBNKB rates are set at provincial to
city level, but the tax base (NJKB) is set by the central government annually. The
central government will decide the NJKB, ie, a set price of every car model. The
highlight of PP No. 8 2020 is that the rule has made available up to 70/80%
discounts on PKB and BBNKB for passenger/public transportation EVs.
Typical BBNKB for ICE is 10-20%, while PKB is progressive based on an umbrella
regulation (1-2% for first vehicle, 2-10% for subsequent vehicles). For instance,
BBNKB for ICE in Jakarta is 12.5% (raised from 10% on 11 December 2019), while
PKB is 2% for first vehicle and up to 10% for subsequent vehicles.
BEV enjoys 0% ownership Meanwhile, Jakarta province has issued a regulation, which will be effective till 31
tax in Jakarta December 2024, to waive BBNKB for BEV. So far, Jakarta has been more aggressive
than other regions in offering tax cut to EV, possible as an effort to curb the city’s heavy
pollution. This could also because the majority of hybrid/BEVs sales are in Jakarta.
Starting this year, Jakarta government has also implemented emission test for vehicles.
BBNKB discounts in Central That said, the Central Java government has also given an up-to-80% discount on
Java, Yogyakarta and Bali BBNKB. Yogyakarta and Bali also offers c.70% discount on PKB and BBNKB.
Perpres No. 55 also defines national BEV companies as those that can fulfil the local
content requirements (TKDN) or those that does R&D/innovation for BEV.
Automakers, components makers and their suppliers meeting the requirements will
receive fiscal and non-fiscal incentives.

Figure 5
Progressive local content Local content (TKDN) requirements for BEV

requirements Category Year Min. local content (%)
2-Wheeler and 3-Wheeler 2019-23 40
2024-25 60
2026 onwards 80
4-Wheeler 2019-21 35
2022-23 40
2024-29 60
2030 onwards 80
Follow-up regulation After the issuance of Perpres No. 55, the government has released a Ministry of
specify how to calculate Industry regulation (Permenperin) No. 27 2020 on 17 September 2020, detailing
TKDN specification of TKDN compliance for BEV.
TKDN is calculated using the cost of local contribution compared to the total cost
of the finished good in each manufacturing aspect. Cost here includes production
cost, materials, direct labour and overhead and cost of tools.
Battery is given greater Each aspect is also broken down by component category and each category is
weighting in the TKDN assigned a weighting. Battery is given a relatively large weighting of 64% among
formula main components.
Figure 6
Local content requirement for BEV under Ministry of Industry regulation No. 27 2020
Category Aspect % of required local content Item Amount
(TKDN) (%)
4-Wheeler Manufacturing for major components 55 Body, cabin, and/or chassis 7
Battery 35
Drive train 13
Manufacturing for supporting components 15 Steering system 4
Suspension 2
Brake system 4
Universal components 5
2-Wheeler and Manufacturing for major components 55 Body/structure 7
3-Wheeler Battery 35
Drive train 13
Manufacturing for supporting components 15 Steering system 3
Wheels and axle 3
Brake system 3
Electrical instruments 3
Universal components 3
All Assembly 10 Use of local labour
At least 80% of workforce 5
50% to <80% of workforce 3
<50% of workforce 0
Use of local tools¹
Structure/Body, and/or chassis 1.25
Painting 1.25
Main and supporting components 1.25
Testing and quality assurance 1.25
All R&D 20 Structure/Body, and/or chassis 6
Battery 5
Drive train 2
Main components 3
Commercialization of BEV 4
¹ 100% if it is local production, 75% if local production but owned by a foreign entity (or JV with local) or imported by local supplier (or JV with foreign).

An automaker should calculate its own TKDN points or in collaboration with third-
party partner in Indonesia, and have them verified by the Verification Agency
(“Lembaga”) which will be set up by the Ministry of Industry. The proposal and
approval process will be done through SIINas (Information system for national
industry) electronic forms. The approval certificate is valid for three years and can
be renewed. If for some reasons, the certificate is revoked, the automaker will be
forbidden to resubmit within one year and there may be other sanctions too. The
Ministry of Industry will evaluate the scheme and monitor its execution.
Incentives are for the whole Perpres No. 55 also lays out broad description of incentives but most of the details
value chain are not specified. We believe, some of the incentives will be given out on a case-
by-case basis. The incentives are intended for the whole value chain including
battery swap providers for 2-wheeler EV, companies that help provide
infrastructure/facilities for BEV industry including charging stations and firms
involved in waste recycling etc.
Fiscal incentives listed in Perpres No. 55 include import duty incentives for
machineries, working capital, components for initial investment, CKD and
incomplete knocked-down (IKD) or main component in certain volume and period.
It also allows postponement of import duty payment for export goods.
There are also incentives on export fees, for research and development, building of
charging stations, as well as offering discounts for EV charging etc.
The government will also provide subsidies for professionals to obtain BEV-related
certificates.
Allowing imports of BEV in Also on 17 September 2020, the Ministry of Industry issued another regulation No.
CKD and IKD forms 28 2020, allowing the import of BEV in CKD and IKD forms and BEV components.
To benefit from the regulation, BEV automakers have to meet the local content
requirements and submit a one-year import plan for approval.
Regulation to support the Separately, Ministry of Energy and Mineral Resources also issued several
setting up of battery regulations to support the construction of EV battery factories. For instance,
factories obligation of miners to increase downstream industrialisation. Miners are allowed
to collaborate with smelting facilities. This will be discussed further in section three.
Some setbacks with Unfortunately, the Covid-19 pandemic has steered away some of the government’s
Covid-19 focus in 2020. Some follow-up regulations on BEV production incentives are still
pending. Therefore, the government’s BEV industry roadmap may see some delays
in execution.
Indonesia’s EV target is very Indonesia’s target to have 20% LCEV among all car produced by 2025 is very
ambitious and likely to be ambitious and likely be revised to a more realistic level. China’s EV sales is c.5% of
revised total car sales in 2020 with first EV subsidies introduced a decade ago.
EV adoption and investment The country is in a piloting stage in adopting EV, with only a small number of
still in an early stage imported EV (hybrid and BEV) used as taxis and passenger cars. It will roll out its
plan to use EV for public transportation, eg, TransJakarta buses, in 2020-21.
Similarly, EV-related investment by automakers and its value chain are also in an
early stage. That said, the current government is resolute in developing the
domestic EV market and industry.

Figure 7
Roadmap for development of BEV, main components and chargers

Component & charger 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Battery
- Battery pack assembly Battery pack (assembly)
- Battery cells production LiB and NiMH cylinder type cell Lib prismatic & pouch type
- Battery management Passive BMS, > 90% BMS efficiency & Active BMS,>95% BMS efficiency &
BMS (assembly)
system integration system CAN BUS integration system CAN BUS/OBD2
- Battery material HPAL Smelter (MHP)
Nickel Sulfate & Cobalt Sulfate Cathode & anode material
- End-of-life (EOL) recycling Recycling of Secondary Battery (NiMH& LiB)
Electric motor Non-permanent Magnet base Efficiency 85%
>94% Efficiency motor
Permanent Magnet Base Efficiency 93%
Converter/inverter >95% Inverter Efficiency (Ultra Low Ron SiC, >96% Inverter efficiency
Low parasitic impedance, High power density) (high frequency HFET)
Charging system AC level I & level II charger DC fast charger/Ultra fast charger
Public transportation Piloting taxi, ride CKD
vehicles hailing companies IKD IKD and part by part
(Import CBU)
Buses & trucks Piloting transjakarta &
IKD Part by part
others BRT (CKD)
Private vehicles CBU import CKD IKD IKD and part by part
Motorcycle CKD & CBU import CKD Part by part

Section 2: Policies and subsidies analyses Indonesia electric vehicles
Policies and subsidies analyses

Gov’t targets to have 20% The government kick-started its plan to build an integrated EV industry ecosystem in
locally-made vehicles to be 2019. It has provided tax incentives to boost demand for EV and launched supportive
EV by 2025 measures to back local production of battery and EV. It aims to have low-emission
vehicles make up 20% of new car sales by 2025, and 30% by 2035. EV here includes
hybrid EV (HEV), plug-in hybrid EV (PHEV), battery EV (BEV), and fuel cell EV (FCEV).
LCEV sales made up 0.1% of Indonesia’s sales of low-carbon-emission vehicles (LCEV), which include hybrid EV
domestic 4W sales in 2020 (HEV), plug-in hybrid EV (PHEV), battery EV (BEV) and fuel cell EV (FCEV), in 2020
totalled only 1,300 units - or only 0.1% of domestic 4W sales. This includes hybrid,
PHEV, and full EV.
Limited EV options At the moment, there are limited options for buyers: 14 models from six automakers.
available; priced higher than Some were launched in late 2020. More importantly, they are priced above mass-
mass-market ICE market ICE models, such as Toyota Avanza, Mitsubishi Xpander and Honda Mobilio,
because they are imported in complete build-up (CBU) form. They target the mid- to
high-spending segments. Also, the new tax regime for hybrid under Government
Regulation PP No. 73 2019 will only come into effect on 16 October 2021.
Figure 8 Figure 9
LCEV 4W sales by brand LCEV 4W sales by models and type

1,000 (units) 700 (units)
600
500
800
400
300
600
200
100
400
0
Nissan Kicks E-Power

Lexus300E
Hyundai Ioniq EV
Toyota Corolla
BMW I8
Hyundai Kona EV
Toyota Camry Hybrid

BMW I3
Mitsubishi Outlander
Lexus ES 250 H
Lexus 250H
Hyundai Ioniq
Hyundai Ioniq
Lexus ES 300 H
Toyota C-HR 1.8
Toyota Corolla Cross

EV Signature
Altis-Hybrid
EV PRIME
200
Hybrid
1.8 Hybrid
PHEV
0
BMW Mitsubishi Lexus Hyundai Nissan Toyota
Note: Tesla figure is not reported. Source: Gaikindo (Indonesia Auto Association) Note: Tesla figure is not reported. Source: Gaikindo (Indonesia Auto Association)
Figure 10
Price range of EV 4W in Indonesia
5,100 (Rpm) 4,745
4,600
3,989
4,100
3,600
3,000 3,000
3,100
2,600 2,850
2,100
1,420 1,500
1,600 1,221 1,245 1,309 1,340
849 998
1,100 587 665
802 675
449 511 561
600 672
625
100
Toyota Corolla Cross (HEV)
BMW I3 (HEV)
BMW I8 (HEV)
Lexus UX 250H (HEV)
Tesla Model S (BEV)

Toyota C-HR Hybrid (HEV)
BYD E-6 (BEV)
Hyundai Kona (BEV)
Lexus UX300E (HEV)
Tesla Model X (BEV)

Mitsubishi Outlander (PHEV)
Tesla Mode 3 (BEV)

Lexus ES 300H (HEV)
Hyundai Ioniq (BEV)
Toyota Alphard Hybrid (HEV)
Lexus LS 500H (HEV)

Toyota Camry Hybrid (HEV)
Toyota Corolla Altis Hybrid (HEV)
Nissan Kicks E-Power (HEV)
Source: Companies

Even the cheapest BEV is The cheapest BEV in Indonesia, Hyundai Ioniq Prime, costs Rp625m, 40% higher
still pricey than Toyota Innova and 2.7 times mass market MPV Toyota Avanza.
Figure 11
Price range of key ICE models in Indonesia
800 (Rpm)
750 734
710
700
643
650
589
600
559
546 550
550
547
491
500 503 509 510
443 446
450 465 470
424
393
400
400
355 389
346 347
350
316 317
315 340
295 304
296
300 276
269
279
303
312
264 295 302
255 280
241 231 238
250 266 270
253 254 258
203 205
…
200 221
208 208 211 214 214
197 200
176 183
150 155
100
Renault Triber (MPV)
Toyota Rush (SUV)
Honda CR-V (SUV)
Hyundai New Santa Fe (SUV)
Toyota C-HR (SUV)

Toyota Avanza (MPV)
Daihatsu Xenia (MPV)
Nissan Livina (MPV)

Honda Mobilio (MPV)
Wuling Cortez (MPV)

Suzuki Ertiga (MPV)
Daihatsu Terios (SUV)
KIA Seltos (SUV)
Toyota Innova (MPV)
Nissan X-Trail (SUV)

Hyundai Kona (SUV)
Wuling Almaz (SUV)
Toyota Sienta (MPV)
Suzuki New SX4 S-Cross (SUV)

Honda H-RV (SUV)
Mitsubishi Pajero (SUV)

Wuling Confero (MPV)
Mitsubishi Xpander (MPV)
Mazda CX-3 (SUV)

Nissan Serena (MPV)
Mazda CX-5 (SUV)

Suzuki Ignis (crossover)
Honda B-RV (SUV)
Toyota Yaris (Hatchback)
Toyota Vios (Sedan)
Toyota Fortuner (SUV)

Sokon Glory 580 (SUV)
Note: Price are before the temporary luxury tax (PPnBM) relaxation . Source: Companies
For BEV, as mentioned earlier, current regulation (PP No. 41 2013) assigns luxury
tax based on engine size, hence there is no tax applicable for BEV. In Jakarta, there
is 0% ownership tax (BBNKB) for BEV, hence, the price of Hyundai Ioniq BEV, which
is regarded as an “electric prime” model, will have no difference before or after the
new tax regimes are in place, ie, at c.Rp625m.
New PP No. 73 lowers price If we take purchase of a Toyota Camry hybrid in Jakarta as an example, under the
gap between hybrid new tax regime, there will be a c.20% drop in price from Rp842m to Rp673m. This
and BEV means closing the price gap between Hyundai Ioniq BEV and Toyota Camry hybrid
from 35% to 8%.

PP No. 73 is not in line with We believe this is not in line with the government’s objective to accelerate the
gov’t’s goal to support development of the BEV industry.
BEV adoption
Figure 12
Scenario 1: Analysis on BEV and hybrid prices pre- and post-new tax regime (PP 73 year 2019) – effective 16 Oct 2021
Model Description Unit Amount
Current Post-new tax regimes
Hyundai Ioniq Factory price Rpm 557 557
(BEV) Luxury tax (PPnBM) % 0
Value added tax (PPN) % 10 10
Est. off-the-road price Rpm 612.7 613
Vehicle ownership tax (BBNKB) % 0.0 0.0
Annual vehicle/road tax (PKB) % 2 2
Est. on-the-road price Rpm 625 625
Toyota Camry Factory price Rpm 490 490
hybrid Luxury tax (PPnBM) % 40 10
Est. off-the-road price Rpm 735 588
Est. on-the-road price Rpm 842 673
Diff. in on-the-road prices (Camry H vs Ioniq BEV) % 35 8
Note: factory price includes import duty. Source: CLSA
New tax regime offers more In the second scenario, the new tax regime clearly offers more pricing advantage to
price advantage to hybrid hybrid than BEV. Price for Toyota Corolla Cross Hybrid will be 37% cheaper than
Hyundai Kona BEV applying the new tax rates, instead of 27% cheaper currently.
Figure 13
Scenario 2: Analysis on BEV and hybrid prices pre- and post- new tax regime
Model Description Unit Amount
Current Post-new tax regimes
Hyundai Kona Factory price (including import duty) Rpm 621 621
(BEV) Luxury tax (PPnBM) % 0
Est. Off the road price Rpm 683 683
Est. On the road price Rpm 697 697
Toyota Corolla Factory price (including import duty) Rpm 343 343
Cross Hybrid Luxury tax (PPnBM) % 20 2
Est. Off the road price Rpm 446 384
Est. On the road price Rpm 511 440
Diff. in On the road price (Corolla Cross H vs Kona BEV) % (27) (37)
Note: factory price includes import duty. Source: CLSA
Wider tax rate gap Thus, at 2-8%, the tax rate gap between full HEV and BEV under the new luxury
needed to accelerate tax regime is too narrow to be able to boost BEV demand. Especially given each
BEV adoption region is allowed to decide its own BBNKB, as long as it is set lower than ICE.

Figure 14
Emission-based tax for PPnBM for typical (1,500-3,000cc) ICE vs Full HEV and BEV - effective 16 Oct 2021
typical ICE vs HEV and BEV Type CO2 (g/km) Engine (cc) PPnBM (%)
ICE <150 1,500-3000 15
150-200 1,500-3000 20
Full HEV <100 1,500-3000 2
100-125 1,500-3000 5
>125-150 1,500-3000 8
BEV 1,500-3000 0
In addition, applying 0% luxury goods tax on both PHEV and BEV, as stipulated in
PP No. 73, does not help boost BEV adoption.
Gov’t to raise luxury taxes The government might have noticed the issue. In a press release dated 11 February
for HEV and PHEV in 2021, Coordinating Ministry for Economic Affairs stipulated that luxury tax for HEV
two stages and PHEV will be raised in two stages: First, in October 2021 when PP No. 73
becomes effective; and second, when local production of BEV commences and
when automakers can meet the local content requirements.
Figure 15
Luxury taxes for PHEV and Luxury taxes for PHEV and HEV under PP NO.73 vs the new Feb2021 regulation
HEV to gradually step up (%)
25
20
20
15
15
12
10 8
8 8 10
5
5 6
0 0 2
0
BEV PHEV PHEV PHEV HEV HEV HEV ICE
(PP 73) (New-stage 1) (New-stage 2) (PP 73) (New-stage 1) (New-stage 2)
If we apply the stage-two new tax rates, instead of those under PP No. 73, on
Hyundai Ioniq (BEV) and Toyota Camry hybrid, the price difference between them
will widen from Toyota Camry being 8%, or c.Rp48m, more expensive to 11%, or
c.Rp70m, more expansive than Hyundai Ioniq.
ICE price can be similar to Let us compare the effect of the new tax regime on ICE and EV/hybrid. For the
hybrid under new tax same brand and model, hybrid and BEV variants are more expensive. For instance,
regime on-the-road price (OTR) of Corolla Cross is Rp460.6m, or 10% cheaper than the
hybrid version. For Toyota Camry, ICE is 20% cheaper than its hybrid version. Take
Corolla Cross as an example, applying the new tax rates, based on its specification
of 15.4km/l gasoline consumption and 150 g/km CO2 emission, the luxury tax will
be 20% for the 1.8l engine car. The 20% tax rate is equivalent to the applicable
luxury tax rate at the moment. However, if its fuel economy specifications can
improve to <150g/km CO2 and >15.5km/l gasoline consumption, it qualifies for a
15% luxury tax rate. In this scenario, the Corolla Cross ICE will see its price fall by
4% and becomes closer to the price level of a hybrid Corolla Cross.

Automakers’ plans for Indonesia

Local production can bring Having EV made locally can bring their costs down, especially if automakers meet
EV cost down the local content requirement and get fiscal/non-fiscal incentives from the
government.
Hyundai
Hyundai is first to offer BEV Meanwhile, Hyundai is automaker to sell BEVs at more affordable prices in
at more affordable prices Indonesia. Tesla and Lexus BEVs both target the high-end market. Hyundai also
offers eight-year guarantee for its BEVs or 160,000km, whichever comes first.
In February 2021, Hyundai unveiled a new Ioniq 5 compact crossover SUV globally.
The new Ioniq 5 is the first BEV based on an EV-dedicated platform - ie, the new
Electric-Global Modular Platform (E-GMP) - that houses flat battery enabling
spacious and customizable interior, unlike its current BEV model which was built on
an ICE platform. The new Ioniq uses 800-volt architecture that allows fast charging
time - 80% in 18 minutes, with a c.500km driving range. It can go from 0 to
100km/h in 5.2 seconds.
It also takes advantage of a dedicated EV platform though adopting a completely

flat floor. It is reported that Hyundai would launch 23 BEVs in stages by 2025.
Hyundai is yet to reveal the price of Ioniq 5, but market expects US$30k-40k pre-
incentive.
Hyundai is setting up car Hyundai is also setting up a manufacturing plant with mass production slated to
factory in Indonesia commence in late 2021. The new plant will have an initial annual capacity of 150k
units, which will gradually increase to 250k units in two to three years. By then,
Hyuandai could enjoy economies of scale in the country. Half of the products made
in Indonesia will be for export, according to Hyundai’s plan. The plant will start with
producing ICE vehicles (SUV and MPV) and move on to BEV depending on demand
and the readiness of local supply chain and infrastructure.
Hyundai’s total investment in Indonesia is estimated at Rp21.8tn (US$1.5bn). First

phase is for ICE production. The company expects to move on to the production of
EV battery and EV in the second phase, ie, December 2022 to 2030.
Figure 16 Figure 17
Hyundai Ioniq 5 - 1 BEV based on EV-dedicated platform

st
Hyundai Ioniq Electric launch in Indonesia (Nov 2020)
Source: Company Source: Company

Hyundai has an innovation Hyundai also has a smart mobility lab in Singapore as a test bed for innovation on
test lab in Singapore future mobility technologies. The move is part of its plan to transform into a smart
mobility solutions provider. The construction is expected to complete by 2H22. It
will run a small-scale test on Hyundai’s EV production facility.
Toyota
Toyota is investing Rp28tn Toyota is investing Rp28tn (US$2bn) for the next three years with full production
in local EV production slated for 2023-24. It expects to start building hybrid by the end of 2022. It is also
developing solid-state battery EV that it claims can be fully charged in 10 minutes
and has an up-to-500km driving range.
As highlighted earlier, majority of LCEV sales in Indonesia is from Toyota. In terms

of model variety, it offers 8 HEVs, 1 PHEV and 1 BEV. Sales has risen from 15 units
per month in 2015 to 79 units per month in 2020. Since they were launched in
2009, cumulative sales have reached more than 3,300 units. These include Corolla
Cross HEV, the first HEV being sold below Rp500m; Prius PHEV, of which some are
used as online taxi; and Lexus UX BEV.
Astra has said in November 2020 that hybrid cars might be more suitable for the
near term, considered pricing and infrastructure and supply chain readiness.
Moreover, Toyota’s competitors have acknowledged that the Japanese carmaker is
benefitting from better cost curve given its early start in hybrid.
Mitsubishi
Mitsubishi currently imports its Outlander PHEV from Thailand’s plant. The
company has yet to disclose plans for local production.
Nissan
Being an alliance with Mitsubishi, Nissan plans to co-produce Nissan Leaf BEV and
Nissan e-Power hybrid with Mitsubishi in Indonesia. Last year, Nissan introduced
its Kicks E-Power in Indonesia which is a hybrid car.
Honda
Honda targets to have two-thirds of its total production being EV globally in 2030.
That said, it has yet to disclose its plans, especially for Indonesia. The automaker is
reportedly carrying out feasibility study.
Suzuki
Suzuki has recently postponed its EV production in India citing commercialisation
issue given the needs to import many components. It has planned to sell Karimun
Wagon R EV at Rs1.2m or c.Rp230m in Indonesia.
Anticipating mass-market In Jan2021, Saic-GM-Wuling announced plan for 2nd BEV product in China, after
Chinese BEVs cheap mass-market Wuling Hongguang Mini (selling at US$4.4k in China - top 2
best-selling NEV in China in 2020). Unfortunately, it is yet to sell the BEVs in
Indonesia. Separately, we are yet to see if BYD will set up BEV production here. At
the moment, BYD is more focused on LFP batteries instead of nickel-based (where
Indonesia has huge advantage in raw materials supply), hence the incentive may not
be strong enough.
DFSK from China is launching an electric version of its Gelora van in Indonesia in
Mar2021, after postponing it last year - with estimated price of Rp468m-499m
(Note: to be imported). The company claimed its driving range is 300km. Its ICE
version of Gelora was sold at ~Rp170m.

Figure 18 Figure 19
DFSK’s e-Gelora Mitsubishi Outlander PHEV
Different countries’ incentives for emobility

Incentives needed for early- As BEV adoption is still in its early stage in terms of scale and cost curve, incentives
stage EV adoption are needed. As to how much incentives are needed, it depends on the stage of EV
development in a country and how fast its government wants EV adoption to be.
Demand side stimulus can A quick way to accelerate adoption is through demand side stimulus as
accelerate EV adoption demonstrated by China. We see countries with ambitious green targets - eg, China,
Norway, the Netherlands - providing more aggressive subsidies to buyers of lower-
emission cars or BEV. Once the country reaches certain adoption level, subsidies
can be phased out, as in the case of China.
China is phasing out EV China, the world’s largest EV market, has been cutting subsidies in stages for its so-
adoption subsidies called NEV (New Energy Vehicles) starting 2016 in an attempt to progressively shift
costs to EV makers. In China, to qualify for any subsidy, electric cars need to have
a driving range (in one full charge) of at least 250km. Note that the subsidies for EV
with <150km range has been removed.
In 2011, a BYD e6 was originally priced at Rmb369.8k, but with subsidies from
central and local governments, its price got reduced by Rmb120k, or c.33%, to
Rmb249.8k. In mid-2019, the government halved EV subsidies from Rmb50k to
Rmb25k. Municipal subsidies were also significantly reduced. In 2020, standard
subsidy for each NEV was c.Rmb18k.
China cut subsidies by China originally planned to remove all subsidies by the end of 2020 given strong EV
20% in 2021 industry development. However, in April 2020, due to the pandemic, it decided to
extend the subsidies and tax breaks for NEV by two years to the end of 2022. In
January 2021, the government reduced subsidies by 20% for this year after seeing
better-than-expected sales in 2020, which was 10% higher than 2019’s sales. This
will see subsidy for each NEV reduced to c.Rmb14.4k.
Some countries are more The following table shows China, Norway and the Netherlands providing much
aggressive in promoting BEV higher incentives towards BEV purchase than HEV. For instance, Norway has
imposed zero tax on BEV and, among other benefits, reduced road toll fee for BEV.
Meanwhile, the Netherlands maintains its 21% value-added tax (VAT) for all
vehicles but imposes new vehicle environment tax on ICE and hybrid cars.

India’s mild hybrids fare In India, there is no full HEV and PHEV available in the market at the moment,
better despite lower tax according to CLSA auto analyst Amyn Pirani. There is only mild hybrids and some
rate on BEV full BEVs. The tax on mild hybrids is in line with normal ICE vehicles, ie, 28-50%,
but full EVs enjoys a lower tax rate of 5%. However, mild hybrids would still be
cheaper given absolute cost difference and the fact that they have really small
batteries. EV sales in India were 3,400 units in 2020, up from 3,600 units in 2019.
Total 4W sales was 2.8m in 2020.
Thailand is less aggressive Whereas in Thailand, purchase tax gap between BEV and HEV is 2-11%. This is
on promoting BEV similar to the tax gap of 2-8% in Indonesia under the PP No. 73, but as discussed
earlier, Indonesia has widened the tax gap between BEV and HEV to 10-12%.
Meanwhile, tax gap between ICE and BEV is 15-20% in Thailand.
Singapore launches Electric Singapore has recently started a campaign to promote clean energy vehicle and
Vehicle Early Adoption launched an Electric Vehicle Early Adoption Incentive (EEAI) programme for the two
Incentive (EEAI) program years from January 2021.
The country has changed its Vehicular Emissions Scheme (VES), which was first
initiated on 1 January 2018, to encourage buyers to choose car models with lower
emissions across five pollutants. Under the new VES, rebate for class A1 and A2
(low emission) vehicles is increased by S$5k for cars and S$7.5k for taxis. On the
other hand, surcharge for class C1 and C2 was raised by the amount from July 2021.
EEAI also offers a 45% rebate on additional registration fee (ARF), capped at
S$20k/BEV car. This is estimated to lower upfront cost of purchase of EV by an
average of 11%.
Figure 20
Singapore’s Vehicular Emissions Scheme (VES)

Band CO2 HC CO Nox PM Current rebate/surcharge New rebate/surcharge
(g/km) (g/km) (g/km) (g/km) (mg/km) (-/+) for cars (S$) (-/+) for cars (S$)
A1 <=90 <=0.02 <=0.15 <=0.007 =0 (20,000) (25,000)
A2 <=125 <=0.036 <=0.19 <=0.013 <=0.3 (10,000) (15,000)
Band <=160 <=0.052 <=0.27 <=0.024 <=0.5 - -
C1 <=185 <=0.075 <=0.35 <=0.03 <=2 10,000 15,000
C2 >185 >0,075 >0.35 >0.03 >2 20,000 25,000

Source: Government of Singapore
Figure 21
Sample calculation for ARF payable in Singapore

Unit Band A1 BEV Band A2 BEV Band A2 ICE
Before rebates S$ 50,800 50,800 50,800
VES rebate/surcharge S$ (25,000) (15,000) (15,000)
45% rebate on ARF (capped at S$20k) S$ (20,000) (20,000) 0
Final ARF payable S$ 5,800 15,800 35,800

Source: Government of Singapore

Figure 22
Demand-side subsidies in countries that promote emobility

Country Type Purchase tax Subsidy Note
(upon purchase)
China ICE 10%.
BEV Exempted. Rmb11.5k-27.5k For vehicles with cruising range of
(US$1.7k-4.1k) >=250km , depending on energy density,
consumption and vehicle's range.
PHEV Exempted. Rmb10k (US$1.5k) >20km travel in pure electric mode.
HEV 10% (equal to ICE).
Norway ICE 25% VAT, registration tax, scrapping car tax (differ by CO2 and Nox emission).
BEV 0% VAT and registration tax. Only scrapping car tax of 2,400KR. Other benefits: no road tax, reduced or
free road tolls in some area, 1/2 price on
ferries, free municipal parking etc.
PHEV Same as ICE, except registration tax cut if meet certain WLTP standard.
HEV Same as ICE.
The ICE 21% VAT, new vehicle environment (BPM) tax (Euro367-774 per CO2),
Netherlands road tax, car retention tax (22%).
BEV 21% VAT, car ownership tax (8%). Free parking schemes and charging in
public parking lots in some cities.
PHEV 21% VAT, BPM tax (Euro 24-199 per CO2), road tax (50% discount),
car ownership tax (22%).
HEV Same with ICE.
Thailand ICE 20-30% (<3,000cc). ICE Eco Car: 10-14%.
BEV 2%.
PHEV/HEV 4-13% (based on carbon emission; 100 to >=200 CO2 g/km).
Indonesia ICE 10-70% luxury tax (based on fuel consumption, engine size and CO2 Effective 16 Oct 2021. Typical ICE
emission), 10% VAT, 12.5% BBNKB, 2% PKB. (<3,000cc excl LCGC): 15-20%.
BEV 0% luxury tax, 10% VAT, 0% BBNKB, 2% PKB. Other benefits eg parking, exemption
for odd-even scheme.
HEV Luxury tax: 6-8% (Stage 1), 10-12% (Stage 2), 10% VAT, BBNKB and PKB = ICE. Stage 1: 16 Oct 2021, Stage 2: when
PHEV Luxury tax: 5% (Stage 1), 8% (Stage 2), 10% VAT, BBNKB and PKB = ICE. BEV is produced locally.
India All Rs10k/kWh for Max. incentive/vehicle capped at 40%
EV/ of cost for buses, and 20% for other
HEV/PHEV except categories.
buses (Rs20k/kWh)
Need to meet certain localisation
requirements to qualify.
Singapore All VES scheme: Surcharge/rebate based on five pollutants. Effective 1 Jan 2021.
EEAI scheme: Rebate on ARF (additional registration fee) capped at S$20k/car.
Total cost savings: Up to S$45k for new BEV car and S$57.5k for taxis.
Source: Governments. For Indonesia: using Jakarta’s scheme
Among Asean countries, Indonesia and Thailand, and to some extent Singapore, are
earlier than the rest in embracing EV. The Filipino and Malaysian governments are
yet to launch clear policies on EV despite setting lower emission targets in the
future.
Thailand aspires to become Thailand has already launched a series of policies to support its goal to become an EV
an EV hub in Asean hub in Asean. The country focuses more on HEV, which we believe is partly because
of a high concentration of Japanese automakers. Regardless, apart from buyer
subsidies, Thailand also offers a 90% reduction in import duties for two years for raw
material for EV not found locally. It has exempted corporate tax for EV automakers
for 10 years. There are also other longer-term policies to support local production.
Thailand also provide 30-70% subsidies for private sector to install charging
stations, eg, in hotels and malls etc; and 100% subsidies for public sector to install
charging stations. It has exempted corporate tax for companies installing charging
facilities for five years, and import duty on charging equipment. The country has
installed 100 charging stations so far and it targets to have 690 stations by 2036.

Thailand encourages buyers Thailand has also proposed a five-year 100,000baht (US$3.3k) trade-in coupon
to replace old ICE with EV scheme to encourage buyers to exchange their current older-than-10-year ICE cars
for EV.
Figure 23
Norway leads the league in EV sales as % of 4W sales in selected countries in 2020

4W EV sales (%)
60
54.0
50
40
30
20
13.7
9.4
10 5.5
0.1 0.1
0
India Indonesia China Thailand The Netherlands Norway
Source: Governments
More than half of Norway’s As mentioned earlier, Norway has an ambitious green targets: To be the first country
4W car sales were to end sales of ICE by 2025. Moreover, 90% of the country’s power comes from
EV in 2020 hydro. More than half of new car sales in Norway was electric in 2020, up from 42%
in 2019 and 1% 10 years ago. In terms of penetration, out of 2.8m vehicles on the
road, 260k or 9% are BEV.
The Netherlands reduced We learned that PHEV had been the dominant EV type in the Netherlands until
incentives for PHEV 2016. But then the government realised that people bought PHEV for the
incentives and barely used the electric motor and later reduced PHEV incentives
and focus on BEV instead.
Figure 24 Figure 25
Rising BEV sales as % of car sales in Norway BEV sales as % of car sales in the Netherlands
(%) BEV PHEV HEV Petrol only Diesel only 16 (%)
100
90 14
80 12
70
10
60
8
50
40 6
30
4
20
2
10
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019
Source: Norwegian Road Federation (OFV) Source: Government of the Netherlands
VES works in Singapore Since the initiation of VES in January 2018, Singapore has seen the number of new
cars qualify for rebates under VES Bands A1 and A2 increased by 60% between
3Q18 and 1Q20, while the number of new cars subject to surcharges under VES
Bands C1 and C2 fell by 20%.

Figure 26
EV targets
Country Target
Norway Zero emission for all new cars in 2025
The Netherlands¹ Zero emission for all new cars in 2030, 25% of car sales being BEV by 2025
UK Zero emission for all new cars in 2030
China² NEV (new energy vehicle) sales to be 20% of new car sales by 2025
Thailand Long term goal to replace 30% of 4W production capacity (750k units out of 2.5m annual production) with EV
(375k PHEV, 375k BEV). Short term goal is to produce 60-110k EVs including 2W and buses
India 100% fleet EV, and 40% individual vehicles by 2030
Indonesia 20% of 4-wheeler production to be LCEV (low carbon emission) by 2025, and 30% by 2035
Singapore Target to phase out ICE in 20 years
¹ The target of 10% BEV by 2020 was already achieved in 2019; ² To achieve carbon neutrality by 2060. Source: Governments
In CLSA’s EV battery expert Ken Shin’s report Three pillars of growth, China’s EV market
notched strong sales in January 2021, recording total NEV sales of 179k units, or up 286%
YoY, despite anticipated subsidies cut. The availability of affordable mass market models,
such as Wuling MINI, Tesla Model 3 and BYD Han, is a driver behind the strong sales. EV
sales in China is on track to reach 1.8m in 21CL.
Meanwhile, Europe’s EV sales volume has more than doubled in 2020 to 1.36m
units, up 142% YoY, on the back of the European green deal, tighter emission
standards and rollout of mass EV models at affordable prices. EU has set strict
targets to increase fuel efficiency to 60mpg and cut CO2 emissions to below
95g/km by 2021, implying further cuts of 15% by 2025 and 37.5% by 2030
compared to 2021 levels.
Attractive subsidies needed Back to Indonesia, the unit price of BEV, excluding usage costs, is far above mass
for EV sales to pick up market ICE models. For example, a Hyundai Ioniq costs Rp625m, but a Toyota
Avanza costs only Rp250m, ie, 60% lower. Until EV prices are driven down by
production localisation and incentives for automakers, the government needs to
provide big rebates - like those offered in China where subsidies covered 40-60%
of BEV costs in early days, or Norway where BEV are exempted for 25% VAT and
registration tax - to boost early adoption. In Singapore, with the new rebate scheme,
buyers can save up to 39% from the purchase of a BYD e6, compared to buying a
non-EV.
Central bank relaxed down To support the government’s BEV roadmap, Bank Indonesia has since mid-
payment rules for BEV since September 2019 allowed up to 0% down payment for banks’ auto financing
Sep 2019 provided that the banks meet a NPL requirement, ie, gross NPL below 5%. Recently,
Bank Indonesia has further relaxed down payment rules for banks that do not meet
the NPL requirement. However, it has also loosened up down payment rules for
non-BEV. Hence, there is no differentiation in down payment rules for BEV and
non-BEV from 1 March 2021 to 31 December 2021.
Figure 27
New down payment requirement for auto financing

Category Sep 2019 NEW (Effective 1 Mar 2021-31 Dec 2021)
(%) Regular vehicles Battery EV Regular vehicles Battery EV
Meet NPL Doesn't Meet NPL Doesn't Meet NPL Doesn't Meet NPL Doesn't
requirement meet requirement meet requirement meet requirement meet
2-Wheeler 15 20 0 15 0 10 0 10
3-Wheeler and more 15 25 0 20 0 10 0 10
(non-productive)
3-Wheeler and more 10 15 0 10 0 5 0 5
(productive)
Source: Bank Indonesia

Access to charging facility

Demand incentives alone is not enough to drive fast adoption of BEV. Another key
aspect is the readiness of charging station network.
Location of charging In a Rakuten survey published in July 2019, out of 3,360 respondents in Indonesia, ‘charging
stations is important stations in the vicinity of residence and work’ are the second most important factor
affecting buyers’ decision to purchase an electric car. The most important factor was ‘tax
rebates and subsidies’. The finding is consistent with researches in other countries.
The same survey also showed that 55.8% of respondents in Indonesia answered
‘Yes’ to the question ‘Are you considering purchasing an electric car?’
Figure 28
What would motivate you to purchase an electric car?

90 (%) Tax rebates and subsidies on electric car purchase Charging stations in the vicinity of residence and work
Priority or special lanes for electric cars Special insurance plans for electric cars
Road tax or toll subsidies Free or subsidised parking spots for electric cars
80
70
60
50
40
30
20
10
0
Indonesia India Singapore China Korea Malaysia Philippines Thailand
Source: Statista
Indonesia has about 80 Indonesia has about 80 charging stations (SPKLU) as of the end of 2020. Stated-
charging stations (SPKLU) owned enterprises, including Perusahaan Listrik Negara (PLN), Pertamina and
Badan Pengkajian dan Penerapan Teknologi (BPPT), have built some of those
stations; while automakers and transport companies such as Hyundai, Mitsubishi,
Bluebird have also constructed some of them. They are mostly located in Jakarta,
with some in other cities in Java, ie, Bandung, Semarang, Solo and Surabaya etc;
and some in Bali and Sumatera’s Palembang and Padang.
The scale of station network is behind Indonesia’s target to have 180 stations by
2020 mainly due to the pandemic. State-owned electricity company PLN has
mentioned that targets may be revised because of the setback. PLN itself has built
about 21 SPKLU in 2020 and targets to build 57 to 60 more stations this year.
Indonesia targets to set up Government’s roadmap for SPKLU buildout is to ensure adequate capacity in line
1,200 stations in 2021-25 with their BEV targets. The roadmap sets targets of 1,200 stations in 2021-25,
5,000 stations in 2026-30 and a total 31,800 stations in 2030.

Figure 29 Figure 30
EV charging station (SPKLU) roadmap EV charging station vs petrol station
35,000 (No. of station) 9,000 No. of EV charging stations (SPKLU)

No. of petrol stations (SPBU)
8,000
30,000
7,000
25,000
6,000
20,000 5,000
15,000 4,000
3,000
10,000
2,000
5,000
1,000
0 0
2019 2020 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F 2019 2020 21F 22F 23F 24F 25F
Source: Ministry of Energy, Mineral and Resources Source: Pertamina, Ministry of Energy, Mineral and Resources
Gov’t expects BEV sales to Assuming the ambitious target of 20% new car sales being LCEV in 2025, and 25%
grow to >50% of LCEV sales in 2030, a back-of-the-envelope calculation shows that the current SPKLU roll out
beyond 2025 plan should be sufficient. This is also based on the government’s assumption that
BEV sales would grow to >50% of LCEV sales beyond 2025. In 2020, BEV sales
contributed to 9% of new LCEV sales.
Targeting daily charging We estimated the daily capacity of each SPKLU in Indonesia is to serve 21 cars,
capacity of >600k units similar to PLN’s 20-car base case. This is based on assumptions of three charging
units per SPKLU with an average two-hour charging time per car, as well as 14
operational hours per day for each SPKLU. We also assume 20,000km annual
mileage for each car and 250km driving range per full charge. Assuming a car needs
to be charged every five days, if SPKLU rollout is executed as targeted, there should
be more than enough charging capacity.
Figure 31 Figure 32
Gov’t target of 4W BEV sales Daily charging capacity vs electric car charged/day
(unit) 4W BEV sales (LHS) (%) 700,000 (No. of cars) Daily charging capacity
450,000 25
4W BEV as % of car sales Est. no. of BEV charged/day
400,000 600,000
350,000 20
500,000
300,000
15 400,000
250,000
200,000 300,000
10
150,000
200,000
100,000 5
100,000
50,000
0 0 0
2020 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F 2020 2025F 2030F
Note: total car sales 10% Cagr in 2023-2030. Source: PLN, CLSA Source: PLN, CLSA
Government cannot do this alone

PLN estimated Rp55tn total PLN was initially appointed as the sole provider of charging stations. PLN estimated
investment in charging the total investment for charging stations to be c.Rp55tn (US$3.8bn) in 2020-30,
stations in 2020-30 or Rp5tn/year.

Figure 33
A steady ramp up Annual investment requirement for charging stations

14,000 (Rpbn) Annual investment for SPKLU (units) 8,000
Addition in SPKLU (RHS)
12,000 7,000
6,000
10,000
5,000
8,000
4,000
6,000
3,000
4,000
2,000
2,000 1,000
0 0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Source: PLN
PLN estimated capex per PLN estimated investment per charging station to be Rp1.5-1.7bn. This is calculated
charging station to be based on the assumption that each charging station has two units of medium-speed
Rp1.5-1.7bn charging units and one fast-charging unit. Capex estimate includes rental cost and
electricity installation.
Figure 34
Charging station cost EV charging station estimates

estimates Type Cost Charging time
Medium charging (25 KW) Rp200m 2.5 - 3 hours
Fast charging (50 KW) Rp800m 1 - 1.5 hours
Ultra-fast charging (120-150 KW) Rp1.4bn 20 minutes
Source: PLN
Welcoming private sector Given impact from the pandemic, PLN would need huge amount of state capital
participation injection (PMN), c.Rp5tn, to complete the targeted number of charging stations. It
would also be challenging for PLN to secure locations to build charging stations
quickly on its own. To ensure efficient use of balance sheet, the government has
opened up the opportunity for private sector to participate.
PLN has collaborated with some 20 companies to invest in SPKLU, including Blue
Bird, BYD, Jasa Marga, Gojek, airport operator Angkasa Pura, Lippo Mall, Bank
Central Asia (BCA), Mitsubishi, BMW, Nissan and PT POS etc.
The Ministry of Energy, Mineral and Resources (ESDM) issued regulation No. 13 in
2020 to regulate the various schemes for PLN to collaborate with third parties in
providing public charging infrastructure. Essentially, there are two types of SPKLU
license (IUPTL), namely integrated license and sale license. Sale license holders
would buy electricity from integrated license holders.
Figure 35
Scheme for integrated license (integrated IUPTL) for EV charging station

Scheme type Provider Owner Operator
Provider, owner, self-operated (POSO) PLN PLN PLN
Provider, owner, privately operated (POPO) PLN PLN IUJPTL (supporting license) holder
Provider, privately owned and operated (PPOO) PLN IUJPTL (supporting license) holder IUJPTL (supporting license) holder
Provider, lease, self-operated (PLSO) PLN Leased from partner PLN
Provide, lease, privately operated (PLPO) PLN Leased from partner IUJPTL (supporting license) holder
Note: IUJPTL: Ijin Usaha Jasa Penunjang Tenaga Listrik. Source: Ministry of Energy, Mineral and Resources

Tariff for public charging is set based on service type: Whether it is bulk sales or
special service. There is a maximum multiplier of a base rate, and multiplier is based
on charging capacity. At the moment, tariff is about Rp1,645-2,467/kWh. In March
2020, there was a promotion of purchase through Charge.IN online app with
LinkAja ewallet payment where tariff was lowered to Rp1,300/kWh.
To speed up EV adoption, SPKLU needs to be located in fuel/gas station, central

and regional government offices, malls, public parking spaces or any other area that
is easy to be reached by BEV owners, with a secure and sage parking place and does
not disrupt traffic flows. Meanwhile in Norway, there are 3,200 charging stations
run by 10 companies.
A chicken and egg situation

Given the return on investment in charging stations depends on the speed of EV
adoption, it is more or less a chicken-and-egg situation.
PLN offers discount on EV As a temporary solution, PLN is offering 30% discount on electricity used for EV
home charging at night home charging from 10pm to 5am as utilisation of power plants decrease at night
by 20%. PLN also stated it would offer separate billing for it. With the discount, it
is estimated that cost will reduce from Rp1,444/kWh to Rp1,000/kWh.
Utilising excess capacity

Indonesia has 50% of PLN assured that there is enough electricity supply for the government’s EV
excess electricity program as currently there is overcapacity of almost 50%, especially in Java. PLN is
looking for new market as the oversupply is expected to last in the medium term. It
said the excess capacity this year is more than enough for the use of 1m BEV.
Current electricity supply Total installed electricity capacity in Indonesia is 63GW or c.554,800m kWh. The
enough to back EV total electricity demand in Indonesia is 261 TWh (or 261,000m kWh). Assuming the
country has 1.6m BEV in 2030, it will need a total of c.5,000m kWh for annual
charging - based on the assumption of 20,000km annual mileage and
15kWh/100km battery efficiency - which is a small portion of the total installed
electricity capacity.
Figure 36 Figure 37
Electricity capacity utilisation rate Installed electricity capacity
53 (%) 70 (GW) PLN Independent power producer
52 60
50
51
40
50
30
49
20
48 10
47 0
2017 2018 2019 3Q20 2017 2018 2019 3Q20
Source: PLN Source: PLN

Battery swap programme - especially for two-wheelers (2W)

Gov’t targets to have 3,000 The Ministry of Energy and Mineral Resources (ESDM)’s regulation No. 13 specifies
battery swap stations by the EV battery swap facilities (SPBKLU). PLN was given the responsibility to provide
the end of 2021 the infrastructure, but subsequently can collaborate with other state-owned or
private companies. The government’s target is to have 3,000 stations by the end of
2021 and 10,000 stations in 2025.
Battery swap facility suits Battery swap facility suits electric bike better as standard range is 60-80km per
2W BEV charge and battery cost is still high at the moment for 2W. Moreover, hybrid does
not make sense for 2W as it will raise its weight significantly and also make the
vehicle more costly. There were 9 SPBKLU in Indonesia as of the end of 2020.
Gov’t targets to have 20% Gov’t targets 20% of 2W sales to be electric in 2025 and 30% in 2030. 2W
of 2W sales to be penetration is already much higher than 4W, at estimated 43% of total population,
BEV in 2025 or 61% of adult population aged 15 or above. Whereas car penetration is 10-11%
of total population, or 15% of adult population. It means that demand for 2W EV
would come from replacement market. Current number of 2W is 115m units.
More than 10 2W EV Currently there are more than 10 brands of 2W registered in market, eg, Viar, Gesits,
brands in the market Honda, Kymco, Selis etc. However, sales was still very small. It is reported there
were about 2,000 2W BEV in the market in 2020, of which 1,400 units were in
Greater Jakarta. Selling prices of 2W EV vary, but they are generally more expensive
than their mass-market conventional peers. Viar, a local brand, has a more
affordable model called Viar Q1 being priced at Rp16m (US$1.1k). Others for
example include: Gesits, a local brand that is priced at Rp25m (US$1.8k) and Honda
PCX Hybrid at Rp40m (US$2.8k).
Chinese brands have lower Chinese brands are to watch as supposedly they have lower cost curve given track
cost curve record and scale. Meanwhile, they are still imported. Niu has done an online pre-
sale of NQi Sport and Gova 03 in Indonesia at the end of last year. Gova was sold
at Rp20.9m (US$1.5k) in Jakarta, while NQi Sport is priced at Rp25.5-33.5m
(US$1.8k-2.4k). NQi Sport is selling at Rmb7.2k (US$1.1k) in China.
Figure 38 Figure 39
Viar Q1 Honda’s PCX Electric launch

Standardisation of The government is working with the two-wheeler association (AISI) to develop 2W
battery pack battery technology, hoping to make 2W BEV more affordable to mass users.
Currently battery can be 40% of the cost. The next key step is to standardise battery
pack to build an efficient battery swap system and lower ownership cost down the
line. Standardisation of battery package should be easier for 2W than 4W.
Current charging cost in the swap facility is Rp200/km. Drivers usually pay Rp8-
10k for 40-50km, according to our channel check which is more affordable than ICE
2W. But there is concern over the availability of swap facility.
Economies of scale could Like in the 4W market, economies of scale will drive 2W EV cost down further. AISI
drive cost down estimates that electric 2W sales has to reach >400k per year, or 6% of the average
sales of 6.4m units pre-covid-19, to make production commercially viable.
Figure 40 Figure 41
Electric 2W sales Battery swap station in Jakarta being used by a Grab driver
2.5 (m units) 2W BEV sales (LHS) (%) 30
2W BEV as % of all 2W sales
25
2.0
20
1.5
15
1.0
10
0.5
5
0.0 0
20 21F 22F 23F 24F 25F 26F 27F 28F 29F 30F
Note: Assuming 4%Cagr for total 2W sales in 2024-2030. Source: CLSA, PLN Source: Company
Grab operates about 5,000 Last year, Grab, in collaboration with Hyundai, Kymco, Viar and Selis, announced
EVs in Indonesia that it operates about 5,000 EVs in Indonesia, including 2W and 4W. Their target is
to have 26,000 EVs by 2025.
Gojek is carrying out Gojek is preparing for commercial pilot of its EVs this year, focusing first on 2W. For
trials on EV initial trial, the company has placed 25 EVs and battery swap stations in Jakarta. This is
also part of a partnership with Pertamina, Gesits, Honda and Viar which supplied the
2Ws for trial. Note that the trial started in mid-2019, when Astra, which owns a stake
in Gojek, through its subsidiary Astra Honda Motor started piloting with Gojek on
Honda PCX Electric. Astra and Gojek have formed a JV to provide auto leasing,
maintenance and insurance services under the brand name Gofleet.
Taiwan’s Gogoro is a The Indonesian government is hoping to create something similar to Gogoro network in
good example Taiwan. Gogoro provides a complete solution - from powerful lightweight batteries
developed with Panasonic, swapping stations, apps and smart scooters. There is also
GoShare platform through which electric bikes can be shared. The company said its
network of riders regularly swap >250k pieces of battery a day. More than 140m batteries
have been swapped between 2015 and 2020. The company claims up-to-170km driving
range per swap. In February 2021, its network consists of 2,000 GoStations and more
than 764k battery packs. Their place one station in every 500m in urban Taiwan, and
every 2-5km elsewhere. The Taiwanese government has subsidised half the costs of
setting up swap stations. Starting 2019, Yamaha and Aeonmotor have begun developing
their own models that can integrate into the Gogoro network.
Uber’s rival Ola develops Similarly, in India, Uber’s rival Ola is also developing a battery swapping ecosystem.
battery swapping system
in India

Figure 42 Figure 43
Gogoro’s Smartscooter Gogoro battery swap station in Taiwan
Source: Gogoro.com Source: Gogoro.com
Vietnam uses minimarkets In Vietnam, large conglomerate Vingroup has launched its first electric scooter,
for battery swapping Klara in late 2018 and has sold 50,000 units in 2019. The price of its low-end
escooter, one of its three models, is US$557 (Rp7.9m). It claimed that Klara can
travel up to 90km per charge with a maximum speed of 50km/h. Drivers can charge
the batteries at any Vingroup-owned convenience stores and supermarkets.
Combined network of Governments can also work together with convenience stores to provide charging
Alfamart and Indomaret and battery swapping services. In Indonesia, the combined network of convenience
have 30,000 service points store chains Alfamart and Indomaret have 30,000 service points nationwide. We
have recently learned that some Alfamarts allow battery swap for Honda PCX
Electric that Honda has leased to Gojek and Grab.
Meanwhile, Oyika in Singapore are providing battery share services that are similar
to Gororo in Cambodia.
All in all, we believe development of charging infrastructure and battery swap

system will boost demand for EV.
Battery recycling
PT Indonesia Puqing is Meanwhile, the government has also started its EV battery recycling plan. Currently,
building a battery PT Indonesia Puqing Recycling Technology is building a facility in the Morowali
recycling facility Industrial Park. Puqing belongs to Brunp, which is a subsidiary of China’s CATL.
However, it is still in licensing process for the import of waste lithium battery given
the lack of supply domestically. The waste is classified as B3 (‘ahan beracun dan
berbahaya) in terms of toxic level.
Stated-owned companies to For the longer run, the government has assigned PT Nasional Hijau Lestari (NHL) -
participate in the long run a consortium of four stated-owned enterprises: PT Indonesia Asahan Aluminium
(Inalum), Antam, Bukit Asam and Timah - to take part in battery recycling. NHL is
currently in waste management and recycling business. It has a NH4CL waste
processing and fertiliser recycling plant in Timah.
Thus, it looks like the government is aware of the environmental impact if the
recycling facility is not ready by the time the first EV battery need to be recycled.
The 130 units 4W BEV sold in 2020 would leave 30 tonnes of batteries to be
replaced in 2030, assuming 250kg average weight per battery and a 10-years
lifecycle. Note that EV is a new thing globally, hence, we are not entirely certain if
the product lifecycle is 10-20 years or beyond that.

An EV case study - by analyst Handy Noverdanius

Learning from Blue Bird
Indonesia’s largest taxi operator Blue Bird is the first transportation company in the
country to introduce EV taxi to its fleet.
The company has started to invest in EV taxi since 2019 by adding a total of 29 EVs
to its fleet, including 25 units of BYD e-6 to serve as regular taxis and four units of
Tesla model-X for the Silver Bird executive taxi service in Greater Jakarta.
Handy Noverdanius Blue Bird invested about Rp40bn on EV taxis in 2019 including installation of EV
Investment Analyst infrastructure, such as charging stations. The company has 14 charging stations in
handy.noverdanius@clsa.com their main depot. Each charging point costs about US$10k to install, according to
+62 21 5088 7831
Blue Bird. These charging stations can cater for all EV brands.
Figure 44 Figure 45
Blue Bird EV taxi EV charging station in the Mampang’s depot
Source: CLSA Source: CLSA
Blur Bird charges customers similar fares for EV and non-EV taxis, except for the
Tesla model of which the fares are set at higher levels. Tariff per km for Tesla model
is 22% higher than non-EV Silver Bird taxi.
Figure 46
Higher tariff charged for Fare comparison between regular and EV taxis
Tesla Silver Bird taxi EV BYD model Non EV regular taxi EV Tesla model Non EV Silver Bird
Open door (Rp) 6,500 6,500 50,000 17,000
Tariff/km (Rp/km) 4,350 4,350 11,000 9,000
Source: CLSA, Company
BIue Bird targets to run 10k In the long run, management targets to operate 10,000 units of EV taxis nationwide.
EV taxis in the long term The company is committed to support the government’s EV programme as well as
improve the country’s air quality.
Blue Bird bagged a four- Blue Bird has bagged a four-year corporate car rental contract to provide Hyundai
year government contract EV to serve several government ministries this year. Moreover, the company is
looking to provide up to 200 units of EVs in 2021 including 80 units to the Ministry
of Transport. Blue Bird said its profit margin would be higher compare to normal car
rental companies.

Angkasa Pura 1 (Bali‘s Besides, Bali’s airport operator Angkasa Pura 1 has also approached the company
airport operator) request to supply EV vehicle taxi in Ngurah Rai International Airport in Denpasar, Bali. Blue
for EV taxis Bird is reviewing the opportunity and may buy up to 10 EVs and two charging
stations this year to cater for the need of Angkasa Pura.
It takes about 90 minutes to charge an EV taxis from empty to full at current

charging stations in their Mampang’s depot and also Soekarno-Hatta International
Airport.
Blue Bird’s current EV can Blue Bird’s current EV taxis, BYD e-6 and Tesla X model, can run up to 250km when
operate up to 250km daily fully charged, similar to conventional taxis. Blue Bird’s conventional taxis have daily
mileage of up to 200km, according to the company.
A comparison between operating costs of EV and non-EV taxis:

 Blue Bird BYD e-6 model: The electricity consumption is 0.203kWh/km, or
5km/kWh equivalent. With electricity price at Rp1,100/kWh, total electricity
cost, assuming 200km daily mileage, is Rp44k per day, or Rp16.1m per year.
 Blue Bird regular taxi: Most of the BIRD regular taxi is using subsidised gasoline
Premium (Ron88) which costs Rp6,450/litre. Assuming 200km daily mileage
(10km/litre), total fuel cost of each regular taxi is Rp129k per day, or Rp47.09m
per year.
 Silver Bird Tesla model X: The electricity consumption is 0.3kWh/km or
3.33km/kWh. With electricity price at Rp1,100/kWh, total electricity cost,
assuming 200km daily mileage, is Rp66k per day, or Rp24.1m per year.
 Silver Bird executive taxi (Toyota Alphard/Mercedes Benz C Class): The
gasoline price of Ron92 (Pertamax) in Jakarta and Greater Jakarta is Rp9k/litre.
Assuming 200km daily mileage (10km/litre), total fuel cost is Rp180k/day or
Rp65.7m per year.
Daily electricity costs of Therefore, the daily electricity cost of an EV taxi is about 66% cheaper than the
EVs are 63-66% cheaper daily fuel cost of a regular taxi. The daily electricity cost of a Tesla taxi is 63%
than fuel costs of non-EVs cheaper than the daily fuel cost of a Silver Bird executive taxi.
Maintenance costs of EVs Spare parts and maintenance costs of EV taxis are also 50-60% cheaper than non-
are also 50-60% lower EV taxis because EVs do not need regular replacement of engine oil and air filter. In
addition, Blue Bird has mentioned that all its EVs come with an eight-year battery
warranty from the producers.
Figure 47 Figure 48
Total daily expenses (electricity vs fuel costs) Total cost of ownership (yearly) - EV vs conventional taxi
200 (Rpk) 3,500 (Rpm) Purchase cost Operating cost
180
3,000
160
140 2,500
120
2,000
100
80 1,500
60 1,000
40
500
20
0 0
BYD E6 Tesla model X Toyota Transmover Toyota Alphard BYD E6 Tesla model X Toyota Transmover Toyota Alphard
(EV) (EV) (EV) (EV)
Source: CLSA Note: Purchase cost is estimated OTR. Source: CLSA

EV prices need to fall below For Blue Bird to massively roll out EV taxis, the prices of EV in Indonesia need to
Rp300m for Blue Bird to fall below Rp300m per car, according to management’s calculation.
massively roll out EV taxis
EV charging station is also one of the main hurdle, according to the company, as the
number of charging stations is still limited. Hence, the construction of charging
network need to be accelerated not only in Jakarta and Greater Jakarta, but also in
smaller cities.
Management is concerned Blue Bird management is also concerned about the resale value of their EV taxis.
about the resale value of Currently, there is no test case on how the resale value will be. For now, Blue Bird
their EV taxis is assuming residual value of 20% of the purchase price which is rather conservative
compared to the assumption of 40% residual value for non-EV taxis. Besides,
depreciation assumption is also based on five-year straight line, hence, the high-
single-digit IRR for EV taxis as compared to conventional taxis’ double-digit IRR.
Total cost ownership comparison

The price of EV in Indonesia is still more expensive than ICE cars. We will compare
the total cost of ownership for BEV and ICE car here. For illustration purposes, we
are using Hyundai Ioniq, Hyundai Kona and Toyota Fortuner as examples.
Higher purchase cost on In terms of purchase price, applying the lowest variant of on-the-road price in
BEV; yet lower operating Jakarta, BEV is 23-32% more expensive. However, our calculation of annual
cost operating cost (fuel/electricity plus regular maintenance) suggested that the
operating cost of BEV is 80% cheaper than ICE car.
Total cost of ownership for All in all, total cost of ownership for BEV is 18-28% higher than ICE car because of
BEV is 18-28% higher than the higher purchase prices. It will take six to nine years of payback period for BEV
ICE car to attain cost parity with ICE car.
Figure 49
EV to reach cost of Payback comparison BEV vs ICE

ownership parity with ICE Model Hyundai Ioniq Hyundai Kona Toyota
car in 6-9 years (BEV) (BEV) Fortuner
OTR price (Rpm) 625 675 510
Price premium vs ICE 115 165
Annual operating cost
Fuel/electricity cost (Rp/kWh)/(Rp/litre) 1,645 1,645 9,000
Driving distance/year (km) 20,000 20,000 20,000
Fuel/electricity usage (km/kWh)/(km/litre) 7 7 10
Total yearly fuel/electricity price (Rpm) 5 5 18
Regular maintenance (engine oil, filter) 5
Cost saving vs ICE (18) (18)
Total cost of ownership (Rpm) 630 680 533
Payback years 6 9
Note: OTR price assumption is using the lowest variant model for Jakarta. Source: CLSA

Figure 50
Higher upfront cost is still Total cost of ownership (TCO) - BEV vs ICE
the main challenge for
acceleration of EV usage in 800 (Rpm) Purchase cost Operating cost
Indonesia
700
600
500
400
300
200
100
0
Hyundai Ioniq (BEV) Hyundai Kona (BEV) Toyota Fortuner Honda CRV
Note: Assuming 20k km per year; operating cost: fuel/electricity plus maintenance for ICE. Source: CLSA
Access to upstream raw Gov’t subsidies aside (be it for consumers, or automakers), one of the biggest
materials is a big incentive incentives for automakers to produce EV is access to upstream raw materials. The
for automakers localisation of battery technology can push cost curve down, and economics may
gradually improve even without gov’t subsidy. This leads us to the next section.

Section 3: Development of EV battery value chain Indonesia electric vehicles
Development of EV battery value chain

by analyst Norman Choong
The Indonesian nickel mining sector has come a long way, transforming itself from
exporting lower-value, non-refined nickel ore into a key iron and steel exporter
engaging in downstream processing. Back in 2009, Indonesia passed a mining law
that would ban all forms of mineral raw export. The mineral ore export ban policy
was officially signed and put in place in January 2014.
When the ore export ban was first put in place, the Indonesian nickel mining sector
Norman Choong had very little smelting capacity and was severely affected. In addition, exports of
Investment Analyst copper, iron ore, lead and zinc concentrates were allowed to continue due to the
norman.choong@clsa.com influence of US mining giants Freeport McMoRan Copper & Gold and Newmont
+62 21 5088 7827 Mining Corp, which together produce almost all of Indonesia’s copper exports.
Figure 51 Figure 52
Indonesia nickel ore export Indonesia NPI production

45 (m tonnes) 600 ('000 tonnes)
40
500
35
30 400
25
300
20
15 200
10
100
5
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
Source: Government of Indonesia Source: : Government of Indonesia
Nickel miners resumed There was a partial relaxation of the nickel ore export ban in 2017, allowing nickel
export of ores for cash to miners to resume the export of ores in exchange for cash to build nickel smelters.
build nickel smelters Since then, Antam’s ferronickel production capacity has been rising. The country’s
exporters also realised at the same time that they had not been managing well their
smelter progress in relation to export quota. Hence, the majority of the domestic
miner’s smelters construction were behind schedule.
Figure 53
Illustration on added value for different products (per tonne of Ni)
+ + + + +
Source: CLSA, MIND ID

Figure 54
Combined stainless steel Nickel and steel export as percentage to GDP

and nickel export still below
2% of GDP (%) Iron and steel export Nickel export
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Bloomberg, Government of Indonesia
Market hailed government‘s One of Indonesia’s largest FDI (foreign direct investment) investor, China’s
nickel ore export ban Tsingshan Holding Group has started its Indonesian stainless steel operation in
2017 and helped reduce the country’s iron and steel-related trade deficit by
US$4bn per year. Due largely to the success of Tsingshan’s operation and its
aspiration to extend investment into EV, the government pushed forward the nickel
ore export ban from 2023 to 1 January 2020. The government is also highly
supportive towards downstream development. As mentioned in earlier section, the
ambition is to become an EV hub in Southeast Asia.
Indonesia’s ban of nickel ore export has a few strategic advantages to attract FDI.
First, stainless steel mill based in Indonesia would be vertically integrated and able
to achieve much lower production cost than those based elsewhere.
Second, Chinese stainless market, which historically imported cheaper nickel ore to
produce NPI (nickel pig iron) domestically, will be short on feed stock if it does not
set up a base in Indonesia.
Indonesia has the largest Third, Indonesia is rich in limonite ore reserves, the type of nickel ore suitable for
most limonite ore reserve using high-pressure acid-leaching (HPAL) method to produce nickel sulfate. HPAL
in the world is the most economical way of marginal production for mixed hydroxide precipitate
(MHP, 50-55% Nickel content) and ultimately nickel sulfate, the final form of raw
materials for nickel-based battery production.

Figure 55
Global battery metals reserves - Indonesia ranked high in nickel and copper
Graphite
Copper
Aluminium
Manganese
Nickel
Cobalt
Lithium
Kazakhstan
India
Mexico
South Africa
Vietnam
Argentina
Saudi Arabia
Malaysia
Australia
Turkey
DRC
China
Canada
Chile
Cuba
Tanzania
Zambia
Indonesia
Russia
Philippines
Ukraine
Brazil
New Caledonia
Guinea
Madagascar
Zimbabwe
United States
Africa Asia Europe Americas Other
Source: CLSA, Ministry of Maritime and Foreign Affairs
Where are we now?

Indonesia’s roadmap to become a key EV producer contains four stages.
Stage 1: To enter stainless steel production and a branch out focus to nickel pig iron
due to the anti-steel tariff from China, mostly on RKEF lines.
Indonesia has successfully Stage 2: To engage in production of battery precursors in the form of nickel matte, MHP,
entered the refining space and nickel sulfate. Both stage 1 and 2 fall under the refining stage in the chart below.
Stage 3: To conduct research on energy storage solutions and engage in battery
cathode productions.
Stage 4: To produce EV.
Figure 56
EV battery value chain

Cell component Battery cell Battery pack EV/ESS/Electronics Recycling/
Mining Refining
production production assembly manufacturing second life use
Lithium
Lithium ore/salt Electrolyte
carbonate
Graphite Graphite Anode
Consumer
Nickel ore Nickel sulfate electronics
Battery module/
Cobalt ore Cobalt sulfate Cathode Battery cell Electric vehicle Spent batteries
pack
Manganese
Manganese ore
sulfate
Electric storage
Bauxite Aluminium Battery

Current collector management
system
Copper ore Copper
Development status of manufacturing functions in Indonesia
Electronic
Separator Not available/
components Available To be developed
no plan yet
Module/
Cell housing
pack housing
Source: CLSA, Mind ID

Gov’t and foreign investors The Indonesian government, together with foreign investors Tsingshan Indonesia,
have planned investment of Huayou Cobalt, CATL, LG Chemical and Tesla, have announced nickel-related investment
US$30-35bn of US$30-35bn so far. We believe the figure would be revised from time to time, and the
rllout of each stage of investment would depend of the success of prior stages.
Tsingshan runs the world’s Meanwhile, Tsingshan Indonesia has already invested US$4bn to establish the
largest stainless plant in world’s largest stainless plant with the lowest production costs in Morowali
Morowali industrial park. In addition, Tsingshan, Huayou Cobalt and Delong have invested a
total of US$1bn in setting up rotary kiln electric furnace (RKEF) lines that produces
nickel pig irons (NPI). These investments are all related to the production of class-
2 nickel and stainless steel.
Three HPAL plants, each with capex ranging from US$1.5bn-2.5bn, is slated to
come online in 2021-22. The project owners are looking to produce nickel sulfate
at a low cost of US$10k/tonne. With the low-cost nickel sulfate and battery
precursors produced locally at competitive price, Indonesia is hopeful to strengthen
its role in the EV value chain.
Formation of state-owned holding company to make EV batteries

Gov’t intents to co-invest In preparation for longer-term downstream development, the government has also
into EV-related sector with announced the formation of Indonesian battery holding company named PT Industri
foreign investors Baterai Indonesia (IBI) through which Mining Industry Indonesia (MIND ID), Antam,
Pertamina and PLN will co-invest into EV battery-related businesses. The
government targets to confirm selection of strategic partners by the end of 2021.
Figure 57 Figure 58
I
Indicative shareholding structure of PT Industri Baterai Indonesia Investments into Indonesia nickel-related industries
40 (US$bn)
35.0
35
30
Mind ID PLN
25% 25% 25
20.9
20
16.0
15
Pertamina Antam
25% 25%
10
0
2020 2024 2033
Source: CLSA, Mind ID Source: CLSA, Ministry of Maritime and Foreign Affair
Antam on upstream, Not much details are available apart from the indication that Antam will be in charge
Pertamina on intermediate, of the upstream, Pertamina on intermediate and PLN on downstream-related joint
PLN on downstream ventures with foreign investors.
It was also reported that the government were negotiating with Korea’s LG Chem
and China’s CATL regarding direct investments of US$10bn and US$5bn
respectively. The intention is to build an integrated production hub for EV battery
in three potential location: Halmahera in North Maluku, South-east Sulawesi and
Papua. Construction may begin in two to three years’ time. Separately, Bloomberg
has reported that LG Chem and CATL have signed agreements to explore
possibilities of forming separate JVs in Indonesia with Antam, which will supply the
ore. Both are still in very early stage. Meanwhile, the ban on nickel ore export will
remain intact.

Figure 59
Gov’t eager to attract Presentation shared by Ministry of Maritime Affairs and Investment
investments in battery
production
Source: CLSA, Ministry of Maritime Affairs and Investment
The goal is to produce nickel sulfate at large scale and competitive costs
To produce nickel sulfate at The big direction going forward is to produce nickel sulfate at the largest scale and
largest scale and lowest the lowest costs. Almost all of the nickel sulfate being used in batteries now come
costs from sulfide ore and its related class-1 nickel from Russia, Canada and Australia.
Laterite ore reserves Most of the planned new MHP and nickel matte production will use lower-grade
suitable to be processed in laterite ore reserves - specifically the limonite ore type will be used in the HPAL
large scale process.
Figure 60
Types of nickel ore and refining methods
60% of global ore supply 40% of global ore supply
Laterite ore Sulfide ore
Leaching Smelting
Leaching
Saprolite Limonite
Smelting Smelting
MSP/MHP Ni matte
HPAL
FeNi NPI Ni sulfate Class 1 Ni Ni oxide

(>15% Ni) (2-17% Ni) (22% Ni) (99% Ni) (75% Ni)
Stainless Alloys &

Batteries
steel others
Current Possible
Antam: operation development
Not in plan
Source: CLSA, Antam, Mind ID, data from a DBS Bank report in 2019

HPAL projects in Indonesia All HPAL plants in Indonesia are aiming for cash cost of lower than US$10k/tonne
aim for low-cost production due to lower opex, scales and government support. Sulfide typically has cash cost
of above US$10k/tonne.
Tsingshan is targeting a Tsingshan has said before that key success lies in technology and experience that
capex of US$250m per 10k enable lower capital expenditure and competitive operating expenses. Tsingshan is
tonnes of nickel targeting to maintain capex at US$250m per 10k tonnes of nickel to ensure
competitiveness especially when nickel cost is high. Nickel cost is US$25k/tonne.
Unfortunately, the project owners did not disclose expected IRR or payback period.
Our channel check with the government on this revealed their confidence on the
feasibility of the HPAL projects by Tsingshan and Harita.
Figure 61
Historical capex twice as Capex comparison between 3 new HPAL plants and historical class-1 nickel production
expensive as targets of 70,000 (US$/tonne)
three HPAL plants
60,000
50,000
40,000
30,000
20,000
10,000
0
Vale Harita Tsingshan- Class-1 sulfide Class-1 sulfide
Huayou JV (historical) mine development
(historical)
Source: CLSA
Figure 62
Four-fifths of future class-1 nickel will come from Indonesia

Base Case to 2025
Country Company Location Nickel Cobalt Timing Product Process Investment Project partner
(kt) (kt) (US$bn)
Australia¹ First Quantum Ravensthorpe 30 0.7 2Q20 MHP HPAL 2.5 First Quantum Minerals
N. Caledonia² Vale VNC (Goro) 30 2 2Q20 NHC (MHP) HPAL 6 Vale
Indonesia PT Halmahera Persada Obi Island 37 4.4 2021 MHP/NiSo4 HPAL 1.3 Harita, Ningbo Lygend
Lygend 1
Indonesia PT Halmahera Persada Obi Island 18 2.2 2022/3 MHP/NiSo4 HPAL
Lygend 2
Indonesia PT QMB New Energy Morowali 50 4 2022 MHP HPAL 1.0 Tsingshan, GEM, Brunp (CATL)
Indonesia Morowali Huayue Nickel Morowali 30 3 2022 MHP HPAL 1.2 Tsingshan, GEM, Huayou
& Cobalt 1
Indonesia Morowali Huayue Nickel Morowali 30 3 2023 MHP HPAL
& Cobalt 2
Indonesia Youshan Nickel Weda Bay 35 0.4 2021 Matte Smelting 0.4 Tsingshan, Huayou, Chengtun
Indonesia Huayou Cobalt Weda Bay 45 0.5 2023 Matte Smelting 0.4 Huayou
Indonesia Acid Iron Metal (AIM) project Morowali - - 2022 Sulphuric acid Refinery 0.3 Merdeka copper gold, Tsingshan
Sub-total 305 20.2
Other potential projects - assumed post 2025 (could be earlier)
Country Company Plant Ni Co Timing Product Process Investment Project partner
(US$bn)
Indonesia Vale/SMM Pomalaa 40 4 2024+ MSP HPAL 2.4 Vale, Sumitomo
Indonesia Huayou/Tsingshan Weda Bay 50 5 2025+ MHP HPAL n/a Tsingshan, Huayou
PNG MCC Ramu 32 3.1 2025+ MHP HPAL 2.1 Metallurgical Corporation of China,
Mineral Resources Development
Company, Highlands Pacific
Australia Sunrise Sunrise 20 4.6 2025+ MHP HPAL 1.8 Cleanteq
Australia Australian Mines Sconi 16 2.2 2025+ MHP HPAL 1.5 Australian Mines
China Jinchuan Fangchengang 30 3 2025+ MHP HPAL na Jinchuan
Sub-total 188 21.9
¹ Has come online in April 2020; ² Capex including mine development, postponed. Source: CLSA, Bloomberg, Harita nickel

Supporting policies
ESDM issued regulations to The Indonesian government is monitoring the development of these projects
encourage EV-related closely and has been very supportive to ensure these HPAL plants could achieve
investments commercial success. The Ministry of Energy and Mineral Resources (ESDM) has
issued three regulations to encourage EV-related investments. They are:
1. Law (UU) No. 3 in 2020 concerning minerals and coal industry which contains
provisions for increasing added value for minerals and metals.
2. Ministerial regulation No. 11 in 2020 concerning the benchmark price for metal
mineral sales.
3. Ministerial regulation No. 11 in 2019 concerning mineral and coal mining
business.
Making it easier to invest in Law (UU) No. 3 in 2020 and Ministerial regulation No. 11 in 2019 intend to simplify
nickel smelting the processes of applying for nickel smelting nickel license and partnership between
IUP holders of nickel reserves and foreign/private investors.
Figure 63 Figure 64
Indonesia monthly nickel guiding price published by ESDM The Philippines’ nickel ore prices vs LME
(US$/t) (US$/t) Philippines 1.5% CIF (US$/t)
18,000 80 19,000
LME Nickel price (RHS)
17,000 18,000
70
17,000
16,000
60 16,000
15,000
15,000
14,000 50
14,000
13,000
40 13,000
12,000
12,000
30
11,000 11,000
10,000 20 10,000
Jan 20 Mar 20 May 20 Jul 20 Sep 20 Nov 20 Jan 21 Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Feb 21
Source: CLSA, ESDM Source: CLSA, Bloomberg
Nickel ore guiding price The most important regulation to the nickel refining sector is the monthly issuance
introduced in mid-2020 was of nickel ore guiding price that was introduced in mid-2020. Recall that Indonesia
a game changer has effective banned all export of nickel on 1 January 2020. Historically, nickel ore
pricing is not as transparent as ferronickel nickel that is benchmarked to LME.
Nickel ore selling prices are typically based on business-to-business negotiation and
has been relatively stable at US$30-35/wmt for the past five to six years.
Indonesian nickel ore prices did not have much correlation with LME benchmark
price before the implementation of mineral ore export ban, while Philippines ore
export price rallied since 2018 due to a shortage in China where half of its NPI
output relied on Indonesian nickel ore.
Market-based pricing for After the domestic market saw oversupply in 1H20 and with laterite ore price as
saprolite ore helps miners low as US$10/wmt, government pushed through a nickel ore guiding price policy
that smelters have to adhere to. For saprolite ore, the guidance price will now track
closer to LME price, which should benefit Antam.

All HPAL projects in All HPAL projects in Indonesia are going to exclusively use limonite ore instead of
Indonesia are going to use saprolite. Limonite ore bodies typically sit above the saprolite. It is a common
limonite ore practice that limonite ores were discarded in the process of mining saprolite ore,
due to its characteristic of lower nickel content and higher moisture content. We
heard that the government plans to introduce a separate guiding price policy for
limonite ore that is at least 20-30% lower than saprolite on a per tonne basis to
support the HPAL plants. We also understand that the government is actively
seeking feedbacks from the HPAL plant owners.
Chinese companies are The chances for HPAL plants to be commercially viable is higher than before as
good at controlling capex miners have learnt from previous mistakes. The Chinese companies also have good
and opex track record of spending significant lesser capex/opex than their western
counterparts. In addition, nickel spot price is at a six-year high. Against this
backdrop, HPAL plants should enjoy some buffer in terms of cost curve incentive.
We shall discuss if nickel prices have become too expensive in the later section.
Tsingshan and Huayou Cobalt’s trial in bulk production of nickel matte

Tsingshan, Huayou are Apart from the HPAL process that utilise hydrolurgy and limonite ore, Tsingshan and
trying to produce nickel Huayou are also experimenting on a new workflow to produce nickel matte, an
matte from nickel pig iron intermediate for class-1 nickel sulfate with 75-80% nickel content.
Previously, nickel matte was typically produced using the sulfide ore deposit in
region outside Asia. We understand Vale Indonesia is the only company in Asia
producing nickel matte from saprolite ore at a competitive cash cost of US$7k/t.
However, Vale has guarded the production skills as a proprietary technology of the
firm.
Tsingshan and Huayou are aiming to have a slightly different workflow where it will
initially produce nickel pig iron (NPI) instead of directly producing nickel matte like
Vale Indonesia does. They will then use a converter to further process the NPI into
nickel matte. It is thus a two-step workflow.
Tsingshan aims to raise NPI Tsingshan has announced that it intended to start supplying 60k tonnes of matte to
production capacity battery materials supplier Huayou Cobalt and 40k tonnes to CNGR by the end of
by 2023 2021. It also aims to significantly raise NPI production capacity by 2023 and adjust
output of either NPI and nickel matte depending on market demand. The news had
caused a recent 15% pullback in nickel prices as market related this to the low cash
cost of US$7k/t and Tsingshan’s ability to produce in bulk, although actual tonnage
delivered may not be significant.
However, Vale has commented that Tsingshan’s two-step workflow is likely to be

more expensive than it anticipated because Tsingshan needs to purchase ore from
third parties and comply to nickel ore guiding price policy. Therefore, the cost to
produce nickel matte should be closed to US$15-16k. Overall, the production costs
of the two-step workflow should be similar to HPAL projects, ie, US$10k/t opex
plus US$4-5k/t capex, but it might be easier for the producer to ramp up supply.
This news should limit short upside risk on nickel price, but given our bullish outlook
on global EV demand, we believe nickel price has structurally broken away from its
previous 10-year cycle that mainly reflects stainless steel prices.

Figure 65
Cost to produce nickel Estimation of Tsingshan and Huayou’s nickel matte production cost
matte at US$15-16k Using Vale matte production cost as proxy (US$/t)
Vale's average 10-year nickel matte cash production cost 7,600
Less mining cost 1,100
Vale cost excluding mining 6,400
Add ore purchase price @ US$45/t 3,500
Implied Tsingshan matte cash cost 10,000
Conversion cost from matte to sulfate 3,000
Net nickel sulfate cost 13,000
Capex recovery in 5-year payback period 2,000
All in cost from nickel matte to sulfate 15,000
Source: CLSA, Vale Indonesia, Wood Mackenzie
Battery precursor production by 2025 to support EV demand

We estimate a 30% Cagr for Our base case for global nickel demand for EV is a 30% Cagr to 2025 - to close to
nickel demand for EV 500k tonnes per annum from c.150k tonnes last year. The growth rate is
accelerating above 30% post-Covid-19 due to strong push in Europe and potentially
US which hopes to change their power grid to batteries and solar.
New projects to double Based on the list of projects of battery precursor production that is set to come
nickel output by 2025 online before 2025, total nickel output would double to 305k tonnes by then. These
are for class-1 nickel, thus, excluding class-2 nickel projects which is also set to
increase capacity by 100k tonnes per annum. The forecast has already taken into
account China’s lack of laterite ore supply and increase in output from Indonesia.
Figure 66
Global demand for nickel to Projection of nickel demand from EV

reach 460k tonnes in 2025 ('000 tonnes)
500
450
400
350
300
250
200
150
100
50
0
2018 2019 2020 21CL 22CL 23CL 24CL 25CL
Source: CLSA
Tight supply continues

Despite soaring demand, nickel output should stay below our 500k tonnes per
annum expected demand by 2025. Therefore, we believe nickel supply would
remain tight by then.

Class-2 conversion to class- The three HPAL plants that were set to come online this year might delay openings
1 is most expensive to 2022, making marginal supply of nickel sulfate to remain scarce. Also, the supply
of class-2 NPI-driven laterite ore, for which the Chinese has a high demand, would
also be tight. We understand that the all-in costs to convert class-2 nickel into class-
1 is more expensive than all other options discussed above.
Figure 67 Figure 68
Breakdown of class-1 and class-2 nickel supplies Further breakdown of class-1 supplies
(%) Class I Class II
100
90
80 42
EV
46 49 15%
52
70 60
60
50
Non-stainless
Stainless
40 55%
30%
30 58
54 51 48
20 40
10
0
2016 2017 2018 2019 2020
Source: CLSA, Wood Mackenzie Source: CLSA, Wood Mackenzie
Class-1 supplies stagnant in We estimate that for year 2020, global refined nickel output was at 2.5m tonnes
the past 3-4 years with a 40:60 split between class-1 and class-2 nickels. This translate into class-1
supply of about 1m tonnes, and class-2 supply of 1.5m tonnes. The split has
changed from 50:50 since 2017 due to a significant ramp up of supply from
Indonesia’s class-2 NPI production. However, we expect the split of 40:60 to
stabilise after Chinese NPI production started to decline this year, following a wave
of pre-emptive stock piling that resulted in higher production in 2020.
Out of the 1m tonnes class-1 nickel supply, about 150k tonnes was in the form of
nickel sulfate that can be used in EV production; 300k tonnes of pure nickel that
can be used for making high-grade stainless steel; and the remaining 550k tonnes
can be used to produce non-stainless alloys and electroplating. Non-stainless class-
1 supply does not change much through time. The most viable substitute would be
to take pure nickel plates that were previously dedicated for high-grade stainless
steel, but it will be expensive to do so.
China’s NPI output at risk The impact of Indonesia nickel ore export ban will become apparent this year as
on the back of low ore supply China reported consecutive monthly NPI output decline due to a lack of nickel ore
supply since October 2020. The latest figure was 37.3k tonnes for December 2020.
Rising NPI output from Higher NPI production from Indonesia should elevate some supply constraint to
Indonesia to benefit local China. However, most new capacity last year are captive in nature. Hence, supply
nickel miner of NPI is likely to remain tight for the Chinese stainless industry. This also means
domestic nickel miner ore sales will benefit from rising NPI output from Indonesia.
Overall nickel ore supply to Using the remaining nickel ore inventories, China might be able to sustain NPI
remain tight output for a while longer. However, we believe the trend is unlikely to reverse,
barring higher output of Philippines ore or export relaxation of Indonesia - both
scenarios look unlikely. We forecast a 30% decline in China NPI output this year,
which will be covered by higher Indonesian NPI output.

Figure 69 Figure 70
Indonesia NPI output forecast China NPI output forecast

800 ('000 tonnes) 600 ('000 tonnes)
700
500
600
400
500
400 300
300
200
200
100
100
0 0
2018 2019 2020 21CL 22CL 2018 2019 2020 21CL 22CL
Tightness in ore supply to Nickel ore price from Philippines has risen from US$30/wmt to US$/70wmt in
reflect in pricing 4Q20, reflecting tight supply in the market. With the reserve in the Tawi-Tawi region
expiring in between 4Q20-1Q21, which contributes 20% of Philippines’ ore supply,
we expect supply from the Philippines to remain at the level in 2014.
Figure 71 Figure 72
China nickel ore inventories Philippines ore export prices

1,400 (‘000 wmt) 80 (US$/t)
1,200 70
60
1,000
50
800
40
600
30
400 20
Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Jan 21 Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Jan 21
Source: CLSA, Bloomberg Source: CLSA, Bloomberg
Demand for nickel from EV We also expect global refined nickel demand to grow by approximately 100k tonnes
continues to grow per annum, with 40k tonnes from battery and 60k tonnes related to recovery of the
metallurgy sector. Market supply for NPI will remain tight. Miners may explore
options to convert class-2 nickel into class-1, but Chinese stainless market would
be competing for the same class-2 supply.
Figure 73
Outlook improved by Surplus/deficit in global refined nickel market

stainless recovery, electric 250 ('000 tonnes)
push, flattish supply
200
150
100
50
0
(50)
(100)
(150)
2014 2015 2016 2017 2018 2019 2020 21CL 22CL
Source: CLSA, Wood Mackenzie

What if nickel price becomes too expensive?

We argue that the substitution risk of nickel as battery materials is significantly
lower than cobalt, while solid-state battery can be a threat in the long run.
Falling battery cost should As highlighted in earlier section, acceleration of EV adoption needs to be supported by
support faster EV adoption rapid decline in EV prices as compared to ICE vehicle. The strong growth in China and
Europe so far has been driven by government’s subsidies while battery cost has also
been rapidly declining due to economic of scales. This has formed a virtuous cycle, as
CLSA’s EV battery expert Ken Shin explained in the Battery Rush series reports.
Figure 74
Upfront cost: 50 kWh lithium iron battery vs ICE

18,000 (US$) Pack cost per avg. EV (50kwh) - Bull
Pack cost per avg. EV (50kwh) - Base
16,000 Pack cost per avg. EV (50kwh) - Bear
14,000 Avg. ICE per price vehicle (bull)
Avg. ICE per price vehicle (base)
12,000 Avg. ICE per price vehicle (bear)
10,000
8,000
6,000
Ken Shin’s base case 4,000
expects EV-ICE parity to
achieve by 2024 2,000
0
2015
2016
2017
18CL
19CL
20CL
21CL
22CL
23CL
24CL
25CL
26CL
27CL
28CL
29CL
30CL
31CL
32CL
33CL
34CL
35CL
36CL
37CL
38CL
39CL
40CL
Source: CLSA
Nickel-rich batteries to stay There are three major battery chemistries that are being developed, namely Lithium
mainstream in the next iron phospate (LFP), nickel-based batteries (NCA, NCM) that occupied most
few years production capacity right now, and solid state battery. In his Battery Rush series
reports, analyst Ken Shin has highlighted that nickel-rich batteries with fewer cobalt
should be the mainstay for the few years to come due to its much higher energy
density than LFP, despite LFP being 20-30% cheaper at cost/kWh. In terms of
specification, solid state battery promises the highest energy density, fastest charging
speed and highest safety, but suppliers have been struggling to bring it to commercial
production due to expensive costs. Studies have showed solid state battery cost is at
least US$400/kWh, compared to US$100-120/kWh for existing batteries.
Figure 75
Nickel-rich batteries have Battery metal density comparison

higher energy density than 8 (kg/kWh) Lithium carbonate Cobalt Nickel
LFP at 20-30% price Manganese Aluminium Graphite
premium 7
Copper Oxygen Iron
6
Sulfer Phosphorous
5
4
3
2
1
0
NCM111
NCM532
NCM622
NCM811
NCM217
NCM811
LCO
LFP
LMO
eLNO
LS
NCA
Source: CLSA

Figure 76
Comparison between leading battery makers

CATL BYD Panasonic LG Chem Samsung SDI SK Innovation
Code 300750 CH 1211 HK 6752 JP 051910 KS 006400 KS 096770 KS
002594 CH
EV battery market share (5M20) 23% 7% 20% 24% 5% 3%
Revenue % from battery related 100 33 6 29 76 2
business (2019)
Major customer Yutong, Geely, BYD, Tesla, Audi, Porsche, VW, Audi, Daimler,
Jinlong, Volvo, Daimler, Toyota, GM, Ford, Renault, BMW, Hyundai,
Tesla, VW, BMW, Toyota, BAIC, VW, JLR, Hyundai, Volvo, Ford, BAIC
Daimler Changan-Ford Ford Geely, Tesla VW
Backlog (2019, US$bn) 70 na 60 100 60 50
Capacity (2019, GWh) 53 40 45 70 20 5
Target capacity (2020, GWh) 93 50 60 100 30 20
Major battery type Prismatic Prismatic Cylindrical Pouch Prismatic Pouch
Major cathode material LFP/NCM LFP/NCM NCA NCM NCA/NCM NCM
Cell energy density (Wh/kg) 250 230/180 280 250 240 240
(NCM811) (NCM622, LFP) (NCA+) (NCM622) (NCA+, NCM) (NCM622)
Cell cost (US$/kWh) 100 90 110 120 130 140
NCM811, silicon Advanced LFP, NCA+, NCMA, NCA+, silicon NCM811,
Technology roadmap anode, CTP, CTP silicon silicon anode, anode, solid silicon
solid electrolyte (Blade battery) anode solid electrolyte electrolyte anode
Material internalisation Medium High Low High Low Medium
Source: Companies, CLSA
Nickel-based battery Most key players are producing nickel-based batteries with 60% nickel content.
is the norm Panasonic’s NCA+ are used by non-Chinese brands. Tesla’s batteries have at least
80% nickel content, while the rest of the manufacturers also aim to follow suit. The
cell costs range from US$90-140/kWh. Manufacturers on the lower end, such as
CATL and BYD, are exploring ways to make LFP safer and has longer range.
Solid-state battery is Some manufacturers, including from Bill Gates and Volkswagen-backed company
still an unknown Quantumscape, have announced plans to commercially produce solid state battery
by 2024. As mentioned earlier, Toyota intends to introduce EV with solid state
battery next year. China’s NIO also planned to make solid state battery in 2023.
However, it remains to be seen if these plans will be realised and the results would
be high-end models or concept cars.
Average cost of battery is Rising commodity price should exert pressure on battery production cost, which
declining despite higher makes up 70% of total EV cost. However, thanks to economies of scale, it appears
costs that average battery cost/kWh has declined last year despite higher commodity
prices across the board.
Figure 77
Demand for nickel to Demand forecast for battery metals and commodities from 2019 to 2030
remain strong
Nickel 14
Aluminium 14
Iron 13
Phosphorus 13
Graphite 10
Copper 10
Lithium 9
Manganese 3
Cobait 3 (x)
0 2 4 6 8 10 12 14 16
Source: CLSA, Bloomberg

Figure 78
Comparison of cell cost/kWh on current and decade-high commodity prices
Source: Benchmark mineral mining intelligence, Antam
A London-based specialist information provider for lithium ion battery has done a
sensitivity study on the cell production cost of the latest NCM811 type batteries
that already used lesser cobalt compared to NCM622. It calculated production
costs using prices for lithium, nickel sulfate and cobalt sulfate in November 2020,
and the highest prices of them in the last decades.
Economics of scale could The exercise take into consideration nickel sulfate and lithium prices having
lower battery prices doubled from November 2020 and cobalt price tripled. Although November 2020
input prices are already at multi-year high, the calculation still yields an implied cell
cost of below US$90/kWh, excluding producer margin. Meanwhile, LFP battery
cost should also increase as iron ore price has rallied to a six-year high in February
2021. Theoretically, we could expect a 35% price increase due to shortage class 1
nickel which may postpone the EV/ICE parity, but not derail it. This is likely to be
still cheaper than solid state battery. Production costs will only reach its tipping
point if economies of scales is achieved.
Figure 79
EV sales to dominate when Lithium ion cost and energy density vs implied cathode prices
battery price falls below (US$/kWh) Cathode price per kg assumption (Wh/kg)
60 600
US$100/kWh Cathode price/kwh
Battery energy density (RHS)
50 500
40 400
30 300
20 200
10 100
0 0
2015 2016 2017 18CL 19CL 20CL 21CL 22CL 23CL 24CL 25CL 26CL 27CL 28CL 29CL 30CL
Source: CLSA

Few producers are selling There are relatively few producers selling mixed hydroxide precipitate (MHP) in the
MHP in the market market. The majority of new nickel HPAL operations, primarily located in Indonesia,
are targeting production of intermediate product MHP, and these plants will play a
central role in catering to the growing demand for nickel in the battery industry.
Stakeholders are concerned Stakeholders have been concerned about the environmental issues associated with
about environmental issues HPAL operations, particularly at plants which use deep-sea tailings as a means of
associated with HPAL waste disposal. A spill at the Ramu plant in Papua New Guinea last year has drawn
much attention from end-users to the environmental, social and governance (ESG)
risks linked to the processing of MHP. During our battery day event in November
2020, Harita said its HPAL facility on Obi Island would use landfill method to
dispose waste. Tsingshan and Huayou did not specify their method of waste
disposal but said they would follow companies’ policies to dispose of industrial
waste.

Section 4: How to play the theme Indonesia electric vehicles
How to play the theme

Astra International is a key We believe Astra International, a conglomerate that has strong presence in its key
beneficiary businesses - from auto distribution, auto and other financing to heavy equipment
and mining contracting, plantation and infrastructure - should benefit from the
many layers of Indonesia’s strategies to boost local EV productions.
Dominance in ICE sales In the auto space, Astra controls 50-51% of the 4W market, mainly through the Toyota
and Daihatsu brands, as well as 79% of the 2W market with the Honda brand. It has a
strong distribution network and is well-known for its good after sales services.
Figure 80 Figure 81
Astra’s 4W market share Astra’s 2W market share

60 (%) 85 (%)
58 80
56 75
54
70
52
65
50
60
48
55
46
44 50
42 45
40 40
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Toyota’s early start in It also benefits from Toyota’s early start in the global hybrid market. Astra sold 79%
hybrid benefits Astra of all new low carbon emission vehicles (LCEV) in 2020, with 71% sales from Toyota
and 8% from Lexus. While Toyota is still catching up on BEV research and
development, Lexus’ BEV is its first BEV model launched in the Indonesian market.
Toyota will invest US$2bn Toyota does not have a local EV production plant yet. But as mentioned earlier, It has
in local EV production in the committed to invest US$2bn in the next three years to produce EV domestically.
next three years Hybrids are not qualified for zero tax like BEVs, but still enjoy much lower tax rates than
ICE cars, hence, will still benefit Astra. As EV infrastructure and their own EV product
portfolio are being developed, hybrid is good for the near term.
Figure 82 Figure 83
Astra’s 4W sales by brand LCEV (low carbon emission vehicle) 4W sales by brand
Isuzu Others BMW Hyundai
6% 0.1% Nissan 0.5% 9%
12% Lexus
8%
Mitsubishi
0.5%
Daihatsu
34%
Toyota
60% Toyota
71%
Note: Toyota includes Lexus. Source: Company Note: Tesla’s sales not captured by Indonesia Auto Association. Source: Gaikindo

Subsidiary launched 2W Astra Honda Motor, the group’s 2W production and distribution arm, and Panasonic
EVs and battery swap have collaborated with PLN’s branch in Bali, state-owned pawnshop Pegadaian,
stations in Bali with Grab and Bali transportation office in launching 30 electric 2W and seven battery
partners swap stations (SPBKLU) in Bali. More activities are expected in the near future.
Auto is largest contributor Nearly half of Astra’s earnings came from its auto business which contributed an
to Astra’s earnings average of 48% to the group’s revenue in 2010-19. However, due to the pandemic,
earnings from auto business fell to 22% in 9M20 as 4W sales plunged by 51% YoY
and 2W sales fell by 38%. Including auto financing - which enables Astra to provide
a comprehensive service from auto sales to financing to insurance to consumers -
auto-related earnings usually made up 55-60% of Astra’s revenue.
Figure 84 Figure 85
Dealership by brand (4W) Astra’s earnings breakdown by segment

350 (dealers) 80 (%) Auto (incl. components) Financial services
United Tractors Astra Agro
300 70 Others
250 60
200 50
150 40
100 30
50 20
0 10
Toyota
Suzuki
Mitsubishi (PC)
Honda
Nissan
Daihatsu
DFSK
Wuling
0
(10)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
9M20
1H20
FY20
1Q20
Note: PC = passenger cars. Source: Companies Source: Company
We maintain an O-PF rating We maintain our Outperform rating and a target price of Rp6,100 for Astra. We use
for Astra a sum-of-the-parts valuation of the company's business profits with a forward
multiple of 17x, which is its pre-Covid-19 historical mean. However, we apply a 26%
discount to this valuation for our target price, given Covid-19 uncertainty, ie,
fluctuation in number of cases, mass vaccination roll-out etc, and taking into account
conglomerate discount. This implies Astra to trade at close to 1sd below historical
mean PE. Please refer to the section on Astra in this report for more details.
Among other listed names in Indonesia, Antam and Vale Indonesia are also key
beneficiaries given their exposure to EV battery materials production:
Multi-year growth  Antam’s key advantage is its position as key supplier of nickel ores and business
for Antam partners for the NPI smelters and nickel sulphate plants in Indonesia. We
forecast a 25% Cagr on their ore sales until 2025 given the expected
commencement of some HPAL projects from 2022. Beyond 2025, Antam will
benefit from its stake in state-owned EV battery holding company PT Industri
Baterai Indonesia with its various JVs with foreign partners.
The company should also benefits from the government’s new nickel benchmark
price policy as well as its cost-cutting initiatives.
We maintain our BUY rating We maintain our BUY rating for Antam and target price at Rp4,000, based on a 14x
and target price of Rp4,000 EV/Ebitda, close to 1sd above the stock’s five-year average, applying this to our
2022 forecasts. This 1sd multiple reflects our view that Antam’s profitability should
be structurally higher than before in the foreseeable future, with its 22CL 21%
Ebitda margin being all-time high and above previous peak of 14% during 2012. We
also believe this improvement is set to continue under our nickel price forecast of
18.5-19k/t for 21-22CL and a mid-long term forecast of US$20k/t, driven by rising
demand for EV, economic recovery as well as a soft US dollar.

Antam is transforming for Unlike Vale Indonesia, Antam does not have a viable 10-year valuation band as
the better the company has transformed dramatically in the past couple of years. It
suffered losses at Ebitda level in 2014-15 when nickel ore export was banned.
The stock briefly traded above 1sd in 2016 due to partial relaxation of the ore
export ban. Antam has subsequently increased its refined nickel capacity.
Figure 86
Antam’s sensitivity to ore price and ore sales volume

22CL
Price assumption (US$/t) 25 30 35 40 45 50 55 60 65
22CL Ebitda (Rpbn) 4,751 5,211 5,670 6,130 6,589 7,049 7,509 7,968 8,428
22CL NPAT (Rpbn) 2,090 2,412 2,733 3,055 3,377 3,699 4,020 4,342 4,664
22CL
Ore sales volume (m wmt) 3 4 5 6 7 8 9 10 11
22CL Ebitda (Rpbn) 4,226 4,817 5,407 5,998 6,589 7,180 7,771 8,362 8,953
22CL NPAT (Rpbn) 1,722 2,136 2,550 2,963 3,377 3,791 4,204 4,618 5,032
Note: wmt is wet metric tonne. Source: CLSA
Vale Indonesia: Most  Vale Indonesia is a producer with high cost-efficiency, and one of the few class-
efficient player and a good 1 nickel producers in the region. The company will ramp up production this year
price proxy following the delay in reconstruction of a furnace in 2020 due to the pandemic.
Subsequently, by mid-2021, it targets to finish the final investment decision
(FID) for a high pressure acid leach plant (HPAL) with an annual capacity to
produce c.50k tonnes of nickel sulphate. This compared to its existing nickel
matte capacity of 80k tonnes which was fully utilised since years ago.
We estimate Ebitda growth of 57/25% in 21/22CL with nickel price assumption
of US$18.5k-19.5k/tonne, versus US$20k spot price. The company is also in
strong net cash position.
We maintain our BUY rating We maintain our BUY rating and Rp8,600 target price for Vale Indonesia. We
and Rp8,600 target price base our TP on a 10x EV/Ebitda, close to 1sd above the stock’s 10-year average,
applying this to our 2022 forecasts. This 1sd above multiple reflects our view
that Vale’s profitability should be structurally higher than before in the
foreseeable future, with its 22CL 48% Ebitda margin above previous high of
40% during 2014 and closing in to the 42-54% range from 2009-2010. We also
believe this improvement is set to continue under our nickel price forecast of
18.5-19k/t for 21-22CL and a mid-long term forecast of US$20k/t, supported
by growing demand for EV, economic recovery, as well as a soft US dollar.
Vale was previously traded at 1sd above 10-year average back in 2013-2014 when the
ore export ban was first announced, and also 2009-10 when nickel price was at
US$25k/t post-global financial crisis. We believe the recent price rally was backed by
fundamentals and similar to the one post-GFC. Refer to company section for more details.
Figure 87
Vale Indonesia’ sensitivity to nickel price

21CL 22CL, Spot
Nickel price assumption (US$/t) 16,000 17,000 18,000 18,500 19,000 20,000 21,000 22,000 23,000 24,000 25,000
Ebitda - 22CL (US$m) 388 447 506 535 562 623 669 727 786 844 902
NPAT - 22CL (US$m) 152 184 217 233 248 281 307 339 371 403 434
Source: CLSA

To become a leader in EV Indonesia aspires to be the future leader in Asean EV industry. The country has
industry in Asean access to raw materials for battery and EV production, while its government is very
supportive to the construction of infrastructure.
Gov’t incentives skewed to Given higher battery density for BEV (eg Hyundai Ioniq at 38.3 kWh, Tesla Model S
BEV to leverage on at 100kWh), compared to HEV (eg Nissan Kicks e-Power at 1.75 kWh, Toyota Camry
abundant raw materials hybrid at 1.3 kWh), and the government’s desire to leverage on its rich raw materials
sources, it is sensible for the authority to launch regulations that are skewed
towards supporting BEV growth.
Iron and steel trade turned Iron and steel has always been among the top contributors to Indonesia’s trade
surplus in 2020 deficit as local production has been insufficient and not competitive enough.
However, the deficit has shrunk substantially since the nickel ore ban in 2014, and
it turned a surplus in 2020. It contributed 19%, or US$4bn, to the total trade surplus
of US$21.5bn in Indonesia in 2020. This happened as there has been more
downstream investment on nickel; predominantly from China’s Tsingshan Group in
Morowali.
Total export rose 46% YoY Despite a decline in import due to a slowdown in economy, export rose 46% YoY in
2020 with China being one of the main destinations. In 2020, total export out of
Downstream industrialisation Indonesia fell just 3% YoY with iron and steel contributing 7%, up from 4% in 2019.
has fuelled export growth
This compared to the 11% contributed by coal export. As a percentage of GDP, iron
and steel export has risen from 0.1% in 2014 to 0.9% in 2020. As highlighted in
section three, more downstream investment on nickel should continue support the
growth in export.
Figure 88 Figure 89
Iron and steel trade Iron and steel export/import trend

(US$bn) (US$bn) Export Import
6 12
4
10
2
8
0
6
(2)
4
(4)
2
(6)
(8) 0
2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020
Source: Government of Indonesia Source: Government of Indonesia
Seizing more share in A more localised production should raise competitiveness and increase Indonesia’s
global market market share in nickel-related products. From 1% in 2014, Indonesia’s share of
global finished nickel products climbed to 25% in 2020. Similarly, Indonesia’s share
of stainless steel production rose from zero in 2016 to 7% in 2020.
Note that Indonesia has already surpassed earlier estimates by Wood Mackenzie,
where a few years ago, it predicted that the country’s share of global finished nickel
and stainless steel would reach 21% and 6% in 2021 respectively.

Figure 90 Figure 91
Global finished nickel production share Global stainless steel production share
(%) Indonesia China Japan South Korea Others (%) China Others India Japan South Korea Indonesia
100 100
80 80
From 1% in 2014 to 25%
60 60
40 40
From 0% to 5%
20 20
0 0
2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F 2014 2015 2016 2017 2018 2019 2020 2021F 2022F
Source: Wood Mackenzie Source: Wood Mackenzie
Iron and Steel export’s We have previously estimated that all else remain constant, every US$1bn
impact on CAD reduction in iron and steel deficit will impact current account deficit (CAD) by 10bps
of GDP. If deficit becomes zero, there should be a 50bps reduction in CAD of GDP.
In 2020, CAD was 0.4% of GDP at US$4.8bn, shrunk from US$30.6bn in 2019, or 2.7%
of GDP. While the improvement was largely due to pandemic’s disruption to demand, ie,
import, which contracted more than export, if iron and steel trade remained a deficit as
in 2019, CAD would be around US$8bn or close to double the actual figure.
Faster EV adoption could On the other hand, faster EV adoption will save petrol consumption and can have a
help reduce the country’s meaningful impact to the country’s structural issue in oil trade deficit as domestic
oil trade deficit production is declining. The oil trade deficit average at 2.2% of GDP in 2011-19.
Indonesia imported 31m tonnes of oil in 2020, totalling US$11.7bn, of which two-
thirds are refined oil at average price of US$398/t. The government has calculated
that the 31m tonnes is about 41% of total domestic consumption of 76m tonnes.
Adoption of 2m 4W EVs & Recently, the Ministry of Energy and Mineral Resources (ESDM) has announced that
13m 2W EVs by 2030 will the adoption of about 2m electric car and 13m electric motorcycles by 2030, as
save Indonesia 77k bbl/day listed in the roadmap, will save 77k bbl/day, equivalent to 4.3k tonnes/day or 1.6m
tonnes/year. That is about 5% of oil import per year or a savings of US$640m
(Rp9tn) at last year’s average price of refined oil import. Current 4W population is
about 29m, while 2W population is about 27m. Separately, biodiesel usage should
save 238k bbl/day in 2030.
Figure 92 Figure 93
Oil & gas trade deficit trend Oil trade volume trend
(US$m) Gas trade Oil trade Oil & gas trade (RHS) (US$m) 50,000 ('000 tonnes) Oil import Oil export
30,000 10,000
45,000
20,000 40,000
5,000
10,000 35,000
0 30,000
0
25,000
(10,000) (5,000) 20,000
(20,000) 15,000
(10,000)
(30,000) 10,000
5,000
(40,000) (15,000)
0
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2012 2013 2014 2015 2016 2017 2018 2019 2020


Downstream Since 2012, Indonesia has recorded CAD due to the structural deficit in oil,
industrialisation, EV machineries, and iron and steel among other things. Downstream industrialisation
adoption could ease CAD and EV adoption will bring some structural changes to its CAD.
This includes possibility of more auto exports if Indonesia does become an EV

production hub for Asean Historically, 20% of auto production goes to export
market. The government wants to see this figure rise to 43% by 2030.
Figure 94 Figure 95
CAD as % of GDP Iron and steel vs auto export

6 (%) 12 (US$bn) Auto and components Iron and steel
4
10
2
8
0
6
(2)
(4) 4
(6)
2
(8)
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2014 2015 2016 2017 2018 2019 2020

Last year, net foreign direct investment (FDI) more than covered CAD but likely due to
a slowdown in imports because of the pandemic. When things normalises, Indonesia
will again face shallow balance of payment because of this structural issue.
To bring in more FDI to As it takes time to improve CAD, an increase in net FDI will be a good relief. We
offset CAD hope to see good execution of the omnibus law to kick start an investment cycle.
We see strong potential from foreign investment in the EV battery value chain as
discussed in previous sections.
Rising Chinese’ FDI Total investment, the sum of FDI and domestic direct investment (DDI), into Indonesia
in 2020 was Rp826tn, or US$58bn, which grew 2% YoY driven by a 7% increase in
DDI as FDI fell 2.4%. We have highlighted in report Indonesia market (Industrial
evolution: Building government-endorsed B2B partnerships with China) that FDI from
China has risen sharply in recent years, of which 40% is in the base metals sector.
Figure 96 Figure 97
CAD vs Net FDI FDI and DDI trend

3 (%) Current account as % of GDP Net FDI as % of GDP 900 (Rptn) FDI DDI
800
2
700
1
600
0 500
(1) 400
300
(2)
200
(3)
100
(4) 0
2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020

Figure 98 Figure 99
Share of China and Japan FDI FDI from China into Indonesia
20 (%) China Japan 20 (US$bn)
15 15
10
10
5
5
0
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2007-2010 2011-2015 2016-2020
'Source: Government of Indonesia Source: Government of Indonesia
US$5bn investment in EV Analyst Norman Choong in section three has highlighted that our base case is
battery value chain from c.US$5bn investment in battery precursor production plants from various project
now to 2025 owners from now to 2025, and potential projects of at least US$2.4bn. While CATL
and LG Chem have also signed MoUs to invest in EV battery plants, those are not
in planning phase yet. In total, we estimate US$19bn of investment in the EV value
chain in the next three to five years.
Figure 100
EV battery and materials investment

Category Timeline Investment (US$bn) Note
Projects in progress up to 2025 4.6
Potential projects Assumed to be post-2025 2.4 Huayou/Tsingshan project in Weda Bay,
(could be earlier) investment size is yet to be announced
Subtotal 7.0
MoUs signed
CATL (EV battery) Not in planning stage yet 5.0 Target to start production in 2024
LG Chem (EV battery) Not in planning stage yet 9.8 Potentially with Hyundai
Total 21.8
Source: Companies
Reducing carbon emission

Initial estimate on carbon The Ministry of Energy and Mineral Resources (ESDM) estimated that the adoption
emission reduction of 2m electric cars and 13m electric motorcycles by 2030 would lower CO2
emission by 11.1m tonnes. We will analyse in more details the impact to carbon
emission in subsequent reports.
Adopting EV should not increase CO2 emission in Indonesia theoretically. It is

because the electricity powering EV is from PLN’s existing 50% excess supply
which, as discussed in previously sections, should be enough to move all old and
new EVs in the foreseeable future.
Moving towards the right A consideration is whether Indonesia can increase the renewable energy portion in its
direction - one step energy mix because the country’s EVs are powered by electricity generated mostly from
at a time coal-fired power plants. Our view is that the government might not have noticed the
issue. Hopefully, it would work out a more comprehensive clean solution for its EV
ecosystem. What is important is that we are moving towards the right direction, let’s
take one step at a time. As a comparison, Norway generates 90% power from hydro.
Job creation
Auto contributes 4-5% The Indonesian government has mentioned that the auto industry employs more
of GDP than 1.5m people, ie, 1.2% of total working population of 128.5m, and contributes
4-5% of total GDP, or Rp700tn (US$50bn). The 1.5m people include those working
in dealership and auto repair shops.

Thailand as an auto hub in Asia

by associate Chelene Indriani
In Thailand, the auto sector, believed to be established in 1962, contributes 10-
12% of GDP currently. The value of car export itself amounts to 5.4% of GDP. The
government has offered various incentives to boost CKD production in the auto
sector, including preferential taxation measures and easier issuance of visa permits
to engineers. Toyota, following years of selling cars to Thailand, has set up its own
plant to make multi-purpose vehicle (MPV), SUV, light trucks and passenger cars in
the country from 2004. Toyota exported those vehicles made in Thailand to Asean
and Oceania.
Chelene Indriani
Research Associate
chelene.indriani@clsa.com As in Indonesia, Toyota also pledged to start making EV in Thailand by 2023, with a
+62 21 5088 7812 commitment of 19bn-baht budget (US$620m) for initial EV development.
Figure 101
Indonesian EV plays valuation

Company Stock Mkt cap Rec Price Target price Upside Div yld (%) TSR PE (x) ROE (%)
code (US$m) (Rp) (Rp) (%) 21CL (%) 21CL
21CL 22CL
Astra International ASII IJ 16,247 O-PF 5,775 6,100 5.6 2.8 8.4 12.5 9.8 11.6
Antam ANTM IJ 3,757 BUY 2,250 4,000 77.8 0.9 78.7 20.1 16.0 13.3
Vale Indonesia INCO IJ 3,107 BUY 4,500 8,600 91.1 0.0 91.1 16.0 12.0 8.7
Source: CLSA
Valuation details - Aneka Tambang (Persero) Tbk ANTM IJ

We based our target price on a 14x EV/Ebitda, close to 1sd above the stock’s five-
year average, applying to our 2022 forecasts. The 1sd above multiple reflects our
expectation that Antam’s profitability would be structurally higher than before in
the foreseeable future, with its 22CL Ebitda margin of 21% being all time high and
above previous peak of 14% in 2012. We also believe this improvement would
continue under our nickel price forecast of US$18.5k-19k/t for 21-22CL and a mid-
long term forecast of USD20k/t, driven by rising demand for electric vehicles,
economic recovery, as well as a soft US dollar.
Investment risks - Aneka Tambang (Persero) Tbk ANTM IJ

The biggest risk is nickel price volatility brought by resurfacing of additional supplies
globally from producers that previously could not generate positive cashflow. A
previous government’s ban on nickel ore export had sparked a sell-off of nickel
futures and the stock. Relaxation of the export ban could benefit Antam as it is one
of the biggest ore exporters. The Covid-19 pandemic may continue to dampen the
demand for and prices of nickel.
Valuation details - Astra International Tbk ASII IJ

We apply a sum-of-the-parts valuation of the company's business profits with a
forward multiple of 17x, which is its pre-Covid-19 historical mean. However, we
impose a 26% discount on the valuation, taking into account Covid-related
uncertainties, such as the speed of mass vaccination roll-out, and factoring in
conglomerate discount.

Investment risks - Astra International Tbk ASII IJ

Apart from the negative impact brought by Covid-19 in the near term, intensifying
competition in the auto industry could diminish Astra's four-wheeler market share
in the medium term. Two-wheeler growth may be limited, given high penetration.
Commodity price volatility also presents a risk to the company's commodity-related
business.
Valuation details - Vale Indonesia Tbk INCO IJ

We base our target price on a 10x EV/Ebitda, close to 1sd above the stock’s 10-
year average, applying this to our 2022 forecasts. The 1sd above multiple reflects
our view that Vale’s profitability would be structurally higher than before in the
foreseeable future, with its 22CL 48% Ebitda margin already higher than the
previous high of 40% in 2014 and closing in to the 42-54% range in 2009-10. We
also expect such improvement to continue as we forecast average nickel price to
reach US$18.5-19k/t in 21-22CL, and US$20k/t in the medium- to long-term. Our
forecast on nickel price is based on data showing strong demand for EVs, possible
Investment risks - Vale Indonesia Tbk INCO IJ

The biggest risk is nickel price volatility. This includes resurfacing of supplies from
overseas producers who failed to generate positive cashflow previously. The
government's decision to lift the ban on mineral-ore exports had sparked a sell-off
of nickel futures and Vale’s stock. Further relaxation of the export ban would be
detrimental to the company and the industry dynamics. A prolonged pandemic may
lower nickel demand and price, hence, harming the company’s earnings.

Notes

Company profiles
Antam ............................................................................................................................. 65
Astra International ........................................................................................................ 73
Vale Indonesia ............................................................................................................... 81
All prices quoted herein are as at close of business 19 March 2021, unless otherwise stated

Notes

Antam
Rp2,250 - BUY
Norman Choong, CFA Multi-year expansion on the way

norman.choong@clsa.com High volume growth and rising ASP
+62 21 5088 7827 Aneka Tambang (Antam) is well-placed to benefit from Indonesia’s pursuit to
Chelene Indriani become a key supplier of electric vehicles (EVs) and EV parts. The company is a major
+62 21 5088 7812 supplier of nickel ores and a business partner with nickel pig iron (NPI) smelters and
nickel sulfate plants. We forecast 133/26% earnings growth for 21-22CL and at least
a 25% Cagr for its ore sales volume until 2025, on the back of rising demand. We
have also seen lower operating expenses and expect ASP to climb. We maintain our
BUY rating and target price at Rp4,000, which represents 78% upside.
Production revival, HPAL projects to boost nickel ore demand

23 March 2021 As Indonesian NPI industry’s demand for nickel continues to grow and negative impact
of Covid-19 on industrial production gradually ebbs, we expect Antam’s ore sales
Indonesia volume to resume to 5m wmt in 21CL and 7m wmt in 22CL. The sales figures will be
Materials even larger if we take into account potential sales to high pressure acid leaching (HPAL)
projects, which are expected to commence from 22CL. We believe a 25% ore sales
Reuters ANTM.JK volume Cagr over 2021-25 is achievable.
Bloomberg ANTM IJ
Priced on 19 March 2021 Lower operating expenses, higher ASP
Jakarta Comp @ 6,356.2 Antam reported a more-than-50% decline in sales expenses last year as buyers
12M hi/lo Rp3,190/348 started to pay for the freight costs for domestic ore sales. State-owned enterprise
12M price target Rp4,000
minister Erick Thohir has also initiated some cost-cutting measures which would
±% potential +78% help Antam save expenses. In addition, we expect Antam’s saprolite ore selling price
to increase significantly thanks to a new pricing policy that uses market prices as
Shares in issue 24,030.8m
Free float (est.) 35.0% benchmarks.
Market cap US$3.8bn JVs with battery and EV makers to drive long-term growth
3M ADV US$144.3m Along with Pertamina and PLN, Antam would be a shareholder of PT Industri Baterai
Foreign s'holding 30.0% Indonesia (IBI) and should hold stakes in future upstream JVs with foreign investors.
Although this is still premature and does not constitute part of our investment thesis,
Major shareholders
Government of Indonesia 65.0%
this could be a long-term driver beyond 2024-25.
Lower-than-country-average ESG; maintain BUY

We base our Rp4,000 target price on 14.0x EV/Ebitda 22CL, 1sd above the stock’s 10-
year average, to reflect recent nickel price increases which we believe are structural in
Blended ESG Score (%)*
nature. The multiple is higher than Vale’s due to Antam’s stronger outlook with its ROE
Overall 36.0 set to rise to double digits. Our 21-22CL net profit estimates are 12-23% above
Country average 54.1 consensus due to forecast update delays and lower average nickel price assumptions.
GEM sector average 72.2 Antam’s ESG score is below the country average due to its low governance score. We
*Click to visit company page on clsa.com for details
expect this to improve with changes in senior management last year.
Stock performance (%)
1M 3M 12M
Absolute (21.9) 15.4 521.5 Financials
Relative (23.4) 10.8 301.5 Year to 31 December 18A 19A 20CL 21CL 22CL
Abs (US$) (24.5) 12.9 556.5 Revenue (Rpbn) 25,275 32,719 25,957 30,034 31,509
3,500 (Rp) Antam (LHS) (%) 400 Net profit (Rpbn) 1,360 (5) 1,153 2,688 3,377
Rel to Comp
3,000 350 EPS (Rp) 56.59 (0.22) 47.97 111.87 140.53
2,500
300 CL/consensus (8) (EPS%) - - 96 112 123
250 EPS growth (% YoY) 896.2 (100.4) nm 133.2 25.6
2,000
200 PE (x) 39.8 nm 46.9 20.1 16.0
1,500
150 Dividend yield (%) 0.1 0.6 0.4 0.9 1.2
1,000
100 FCF yield (%) (4.0) (1.8) 1.5 4.9 6.3
500 50
PB (x) 2.9 3.0 2.8 2.5 2.3
0 0
ROE (%) 7.4 0.0 6.2 13.3 14.9
Mar 19 Nov 19 Jul 20 Mar 21 Net debt/equity (%) 30.5 27.1 22.2 8.9 (4.9)
Source: Bloomberg Source: www.clsa.com

Antam - BUY Indonesia electric vehicles
Financials at a glance
Year to 31 December 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Profit & Loss (Rpbn)

Revenue 25,275 32,719 25,957 (20.7) 30,034 31,509
Cogs (ex-D&A) (19,842) (27,534) (20,544) (21,984) (22,399)
Gross Profit (ex-D&A) 5,433 5,184 5,413 4.4 8,049 9,110
SG&A and other expenses (3,106) (3,492) (1,947) (2,403) (2,521)
Op Ebitda 2,327 1,693 3,466 104.8 5,647 6,589
Depreciation/amortisation (771) (737) (998) (1,021) (1,045)
Op Ebit 1,556 956 2,469 158.3 4,625 5,544
Net interest inc/(exp) (870) (113) (734) (697) (632)
Other non-Op items 1,051 (156) (88) (88) (88)
Profit before tax 1,737 687 1,647 139.7 3,840 4,824
Taxation (377) (493) (494) (1,152) (1,447)
Profit after tax 1,360 194 1,153 494.6 2,688 3,377
Minority interest 0 (199) 0 0 0
Net profit 1,360 (5) 1,153 2,688 3,377
Adjusted profit 1,360 (5) 1,153 2,688 3,377
Cashflow (Rpbn) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Operating profit 1,556 956 2,469 158.3 4,625 5,544
Depreciation/amortisation 771 737 998 35.3 1,021 1,045
Working capital changes 1,945 (1,674) 482 (185) (63)
Other items (293) (896) (1,437) (2,112) (2,426)
Net operating cashflow 3,979 (877) 2,512 3,350 4,101
Capital expenditure (6,168) (113) (1,722) (679) (679)
Free cashflow (2,188) (991) 790 2,672 3,422
M&A/Others 1,816 1,820 120 (93.4) 174 258
Net investing cashflow (4,351) 1,707 (1,602) (504) (420)
Increase in loans 522 (1,364) 936 190 209
Dividends (48) (306) (216) (503) (632)
Net equity raised/other (1,354) 177 0 0 -
Net financing cashflow (880) (1,492) 720 (313) (422)
Incr/(decr) in net cash (1,252) (663) 1,631 2,534 3,258
Exch rate movements - - - - -
Balance sheet (Rpbn) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Cash & equivalents 4,299 3,636 5,267 44.8 7,800 11,058
Accounts receivable 944 1,002 795 (20.7) 920 965
Other current assets 2,099 3,027 2,599 (14.1) 2,692 2,720
Fixed assets 19,364 18,866 19,590 3.8 19,248 18,881
Investments 1,145 745 745 0 745 745
Intangible assets 0 0 0 0 0
Other non-current assets 4,344 2,919 2,919 0 2,919 2,919
Total assets 32,195 30,195 31,916 5.7 34,324 37,289
Short-term debt 2,574 2,993 3,268 9.2 3,458 3,667
Accounts payable 768 640 487 (23.8) 521 530
Other current liabs 2,221 1,660 1,660 0 1,660 1,660
Long-term debt/CBs 7,348 5,564 6,225 11.9 6,225 6,225
Provisions/other LT liabs 837 1,204 1,204 0 1,204 1,204
Shareholder funds 18,448 18,133 19,070 5.2 21,256 24,001
Minorities/other equity 0 0 0 0 0 0
Total liabs & equity 32,195 30,195 31,916 5.7 34,324 37,289
Ratio analysis 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Revenue growth (% YoY) 99.7 29.4 (20.7) 15.7 4.9
Ebitda margin (%) 9.2 5.2 13.4 18.8 20.9
Ebit margin (%) 6.2 2.9 9.5 15.4 17.6
Net profit growth (%) 896.2 (100.4) nm 133.2 25.6
Op cashflow growth (% YoY) nm (122.0) nm 33.4 22.4
Capex/sales (%) 24.4 0.3 6.6 2.3 2.2
Net debt/equity (%) 30.5 27.1 22.2 8.9 (4.9)
Net debt/Ebitda (x) 2.4 2.9 1.2 0.3 -
ROE (%) 7.4 0.0 6.2 13.3 14.9
ROIC (%) 5.5 1.1 7.3 13.7 16.6
Source: www.clsa.com
66 norman.choong@clsa.com 23 March 2021

Antam sensitivity to ore price and ore sales volume

22CL
Price assumption (US$/tonne) 25 30 35 40 45 50 55 60 65
22CL Ebitda (Rpbn) 4,751 5,211 5,670 6,130 6,589 7,049 7,509 7,968 8,428
22CL NPAT (Rpbn) 2,090 2,412 2,733 3,055 3,377 3,699 4,020 4,342 4,664
22CL
Ore sales volume (m wmt) 3 4 5 6 7 8 9 10 11
22CL Ebitda (Rpbn) 4,226 4,817 5,407 5,998 6,589 7,180 7,771 8,362 8,953
22CL NPAT (Rpbn) 1,722 2,136 2,550 2,963 3,377 3,791 4,204 4,618 5,032
Note: wmt is wet metric ton. Source: CLSA
Antam EV/Ebitda band Antam past 10 years Ebitda growth trend
22 (x) 250 (%) 3,000
20
200
18
150
16 105
93
+1sd 14.53x 100 83
14 63
12 50
17
2
avg 10.58x
10 0
8 (50) (33) (27)

(45)
-1sd 6.63x
6 (69)
(100)
(93)
4
(150)
2
2011
2012
2013
2014
2015
2016
2017
2018
2019
20CL
21CL
22CL
Feb 16 Dec 16 Oct 17 Aug 18 Jun 19 Apr 20 Feb 21
Source: CLSA Source: CLSA, Antam
We base our target price on We base our target price on 14x EV/Ebitda, close to 1sd above the stock’s five-year
14x EV/Ebitda, close to 1sd average, and apply this to our 2022 forecasts. The 1sd above multiple reflects our
above Antam’s belief that Antam’s profitability would likely be structurally higher than before in
five-year average
the foreseeable future, with its 22CL Ebitda margin of 21% representing an all-time
high, topping the previous peak of 14% in 2012. We expect the rise to continue
with our nickel price forecast of US$18,500-19,000/t for 21-22CL and a mid-long
term forecast of US$20,000/t, driven by rising demand for electric vehicles,
economic recovery, as well as a soft US dollar that would support the US$-
denominated nickel prices.
Antam suffered Ebitda Unlike Vale Indonesia (Vale), Antam does not have a viable 10-year valuation band
losses in 2014-15 when as the company has transformed dramatically in the last decade. It suffered Ebitda
nickel export was banned losses in 2014-15 when nickel ore exports were banned and briefly traded above
1sd in 2016 due to partial relaxation of the export ban. The company has
subsequently increased refined nickel capacity.
The introduction of ore Its nickel ore segment has also seen structural improvement since the introduction
price guiding policy has led of ore price guiding policy which has led to higher average selling price (ASP). All of
to higher ASP its nickel ore sales volume is from the domestic market now, instead of from
exports, hence minimising export ban risk. Selling ores locally also incurs less
operating expenses.
23 March 2021 norman.choong@clsa.com 67

Antam valuation summary

Unit Value
Ebitda (Rpbn) 6,589
Target multiple (x) 14
EV (Rpbn) 92,252
Plus net cash (Rpbn) 1,165
Equity value (Rpbn) 93,417
Number of shares (million) 24,031
Value per share (Rp/share) 4,000
Source: CLSA
The Street has been CLSA’s 21-22CL net profit estimates are 12-23% above consensus estimates, we
upgrading Antam, we believe this is the combined result of a delay in the Street updating forecast to latest
expect more to follow management target and that the Street is assuming lower average nickel prices. We
expect this to change and are already seeing a significant pickup in peers reinitiating
coverage on Antam with significant increases in estimates.
Awareness of ESG was low Antam’s ESG score is below the country average. It received a low mark in
but we are seeing signs of governance in particular and scored just average in the environmental aspect.
improvement However, we expect this to improve. Antam had seen a change of senior
management last year and since then demonstrated improved operating expenses
to sales ratio and better disclosure. Over the longer term, when more scrutiny is in
place for carbon emission, we believe Antam would adopt a more stringent protocal
as it becomes a key player in the electric vehicles value chain.
Valuation details
We base our TP on a 14x We based our target price on a 14x EV/Ebitda, close to 1sd above the stock’s five-
EV/Ebitda 22CL year average, applying to our 2022 forecasts. The 1sd above multiple reflects our
expectation that Antam’s profitability would be structurally higher than before in
the foreseeable future, with its 22CL Ebitda margin of 21% being all time high and
above previous peak of 14% in 2012. We also believe this improvement would
continue under our nickel price forecast of US$18.5k-19k/t for 21-22CL and a mid-
long term forecast of USD20k/t, driven by rising demand for electric vehicles,
Investment risks
The biggest risk is nickel The biggest risk is nickel price volatility brought by resurfacing of additional supplies
price volatility globally from producers that previously could not generate positive cashflow. A
previous government’s ban on nickel ore export had sparked a sell-off of nickel
futures and the stock. Relaxation of the export ban could benefit Antam as it is one
of the biggest ore exporters. The Covid-19 pandemic may continue to dampen the
demand for and prices of nickel.

Detailed financials
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Revenue 9,106 12,654 25,275 32,719 25,957 30,034 31,509
Cogs (ex-D&A) (7,605) (10,403) (19,842) (27,534) (20,544) (21,984) (22,399)
Gross Profit (ex-D&A) 1,502 2,250 5,433 5,184 5,413 8,049 9,110
Research & development costs - - - - - - -
Selling & marketing expenses (136) (249) (1,319) (1,444) (389) (601) (630)
Other SG&A (707) (794) (1,787) (2,047) (1,557) (1,802) (1,891)
Other Op Expenses ex-D&A - - 0 - - - -
Op Ebitda 658 1,207 2,327 1,693 3,466 5,647 6,589
Depreciation/amortisation (650) (606) (771) (737) (998) (1,021) (1,045)
Op Ebit 8 601 1,556 956 2,469 4,625 5,544
Interest income 343 260 261 120 120 174 258
Interest expense (319) (608) (1,130) (233) (854) (872) (890)
Net interest inc/(exp) 24 (348) (870) (113) (734) (697) (632)
Associates/investments (282) (488) (1,260) (88) (88) (88) (88)
Forex/other income 97 (57) 276 (236) - - -
Asset sales/other cash items - 0 0 - - - -
Provisions/other non-cash items 390 747 2,034 168 - - -
Asset revaluation/Exceptional items - - - - - - -
Profit before tax 237 454 1,737 687 1,647 3,840 4,824
Taxation (172) (318) (377) (493) (494) (1,152) (1,447)
Profit after tax 65 137 1,360 194 1,153 2,688 3,377
Preference dividends - - - - - - -
Profit for period 65 137 1,360 194 1,153 2,688 3,377
Minority interest 0 0 0 (199) 0 0 0
Net profit 65 137 1,360 (5) 1,153 2,688 3,377
Extraordinaries/others 0 0 0 0 0 0 0
Profit avail to ordinary shares 65 137 1,360 (5) 1,153 2,688 3,377
Dividends 0 (48) (48) (306) (216) (503) (632)
Retained profit 65 89 1,312 (311) 937 2,185 2,745
Adjusted profit 65 137 1,360 (5) 1,153 2,688 3,377
EPS (Rp) 5.4 5.7 56.6 (0.2) 48.0 111.9 140.5
Adj EPS [pre excep] (Rp) 5.4 5.7 56.6 (0.2) 48.0 111.9 140.5
Core EPS (Rp) 5.4 5.7 56.6 (0.2) 48.0 111.9 140.5
DPS (Rp) 0.0 2.0 2.0 12.7 9.0 20.9 26.3
Profit & loss ratios

Growth (%)
Revenue growth (% YoY) (13.5) 39.0 99.7 29.4 (20.7) 15.7 4.9
Ebitda growth (% YoY) 3,000.0 83.4 92.8 (27.3) 104.8 62.9 16.7
Ebit growth (% YoY) nm 7,263.9 159.1 (38.6) 158.3 87.4 19.9
Net profit growth (%) nm 110.6 896.2 (100.4) nm 133.2 25.6
EPS growth (% YoY) nm 4.8 896.2 (100.4) nm 133.2 25.6
Adj EPS growth (% YoY) nm 4.8 896.2 (100.4) nm 133.2 25.6
DPS growth (% YoY) - - 0.0 540.6 (29.5) 133.2 25.6
Core EPS growth (% YoY) nm 4.8 896.2 (100.4) nm 133.2 25.6
Margins (%)
Gross margin (%) 16.5 17.8 21.5 15.8 20.9 26.8 28.9
Ebitda margin (%) 7.2 9.5 9.2 5.2 13.4 18.8 20.9
Ebit margin (%) 0.1 4.7 6.2 2.9 9.5 15.4 17.6
Net profit margin (%) 0.7 1.1 5.4 0.0 4.4 9.0 10.7
Core profit margin 0.7 1.1 5.4 0.0 4.4 9.0 10.7
Op cashflow margin 5.3 (22.1) 15.7 (2.7) 9.7 11.2 13.0
Returns (%)
ROE (%) 0.4 0.7 7.4 0.0 6.2 13.3 14.9
ROA (%) 0.0 0.6 3.9 0.9 5.6 9.8 10.8
ROIC (%) 0.0 0.9 5.5 1.1 7.3 13.7 16.6
ROCE (%) 0.0 2.7 6.6 4.0 10.4 19.4 23.5
Other key ratios (%)
Effective tax rate (%) 72.7 70.0 21.7 71.8 30.0 30.0 30.0
Ebitda/net int exp (x) - 3.5 2.7 15.0 4.7 8.1 10.4
Exceptional or extraord. inc/PBT (%) - - - - - - -
Dividend payout (%) 0.0 35.0 3.5 - 18.7 18.7 18.7

Balance sheet (Rpbn)

Cash & equivalents 7,623 5,551 4,299 3,636 5,267 7,800 11,058
Accounts receivable 834 971 944 1,002 795 920 965
Inventories 1,388 1,258 1,846 1,796 1,369 1,462 1,490
Other current assets 784 1,222 254 1,230 1,230 1,230 1,230
Current assets 10,630 9,002 7,342 7,665 8,661 11,413 14,744
Fixed assets 12,959 14,093 19,364 18,866 19,590 19,248 18,881
Investments 3,217 2,526 1,145 745 745 745 745
Goodwill 0 0 0 0 0 0 0
Other intangible assets 0 0 0 0 0 0 0
Other non-current assets 3,176 4,393 4,344 2,919 2,919 2,919 2,919
Total assets 29,982 30,014 32,195 30,195 31,916 34,324 37,289
Short term loans/OD 3,255 4,101 2,574 2,993 3,268 3,458 3,667
Accounts payable 586 806 768 640 487 521 530
Accrued expenses 215 388 875 442 442 442 442
Taxes payable 61 36 154 96 96 96 96
Other current liabs 235 220 1,191 1,122 1,122 1,122 1,122
Current liabilities 4,352 5,552 5,562 5,293 5,415 5,639 5,858
Long-term debt/leases/other 6,649 5,298 7,348 5,564 6,225 6,225 6,225
Convertible bonds - - - - - - -
Provisions/other LT liabs 571 674 837 1,204 1,204 1,204 1,204
Total liabilities 11,573 11,524 13,747 12,061 12,845 13,068 13,288
Share capital 6,338 6,338 6,338 6,338 6,338 6,338 6,338
Retained earnings 9,662 6,563 8,038 7,913 8,850 11,035 13,780
Reserves/others 2,409 5,590 4,072 3,883 3,883 3,883 3,883
Shareholder funds 18,409 18,490 18,448 18,133 19,070 21,256 24,001
Minorities/other equity 0 0 0 0 0 0 0
Total equity 18,409 18,490 18,448 18,133 19,070 21,256 24,001
Total liabs & equity 29,982 30,014 32,195 30,195 31,916 34,324 37,289
Total debt 9,905 9,399 9,921 8,558 9,493 9,684 9,893
Net debt 2,281 3,848 5,622 4,921 4,227 1,883 (1,165)
Adjusted EV 25,976 55,392 58,546 58,246 57,551 55,208 52,159
BVPS (Rp) 1,539.1 769.4 767.7 754.6 793.6 884.5 998.8
Balance sheet ratios

Key ratios
Current ratio (x) 2.4 1.6 1.3 1.4 1.6 2.0 2.5
Growth in total assets (% YoY) (1.2) 0.1 7.3 (6.2) 5.7 7.5 8.6
Growth in capital employed (% YoY) 1.8 8.0 7.6 (3.4) 1.0 (0.7) (1.3)
Net debt to operating cashflow (x) 4.8 (1.4) 1.4 (5.6) 1.7 0.6 -
Gross debt to operating cashflow (x) 20.6 (3.4) 2.5 (9.8) 3.8 2.9 2.4
Gross debt to Ebitda (x) 15.1 7.8 4.3 5.1 2.7 1.7 1.5
Net debt/Ebitda (x) 3.5 3.2 2.4 2.9 1.2 0.3 -
Gearing
Net debt/equity (%) 12.4 20.8 30.5 27.1 22.2 8.9 (4.9)
Gross debt/equity (%) 53.8 50.8 53.8 47.2 49.8 45.6 41.2
Interest cover (x) 1.1 1.4 1.6 4.6 3.0 5.5 6.5
Debt cover (x) 0.0 (0.3) 0.4 (0.1) 0.3 0.3 0.4
Net cash per share (Rp) (190.7) (160.1) (234.0) (204.8) (175.9) (78.4) 48.5
Working capital analysis
Inventory days 69.4 43.9 27.5 23.5 26.8 22.5 23.0
Debtor days 25.7 26.0 13.8 10.9 12.6 10.4 10.9
Creditor days 29.0 23.1 13.9 9.1 9.5 8.0 8.2
Working capital/Sales (%) 21.0 15.8 0.2 5.3 4.8 4.8 4.7
Capital employed analysis
Sales/Capital employed (%) 43.2 55.6 103.2 138.3 108.6 126.5 134.4
EV/Capital employed (%) 123.4 243.5 239.1 246.2 240.8 232.5 222.5
Working capital/Capital employed (%) 9.1 8.8 0.2 7.3 5.2 6.0 6.4
Fixed capital/Capital employed (%) 61.5 61.9 79.1 79.7 82.0 81.1 80.5
Other ratios (%)
PB (x) 1.5 2.9 2.9 3.0 2.8 2.5 2.3
EV/Ebitda (x) 39.5 45.9 25.2 34.4 16.6 9.8 7.9
EV/OCF (x) 54.1 (19.8) 14.7 (66.4) 22.9 16.5 12.7
EV/FCF (x) (30.2) (12.2) (26.8) (58.8) 72.9 20.7 15.2
EV/Sales (x) 2.9 4.4 2.3 1.8 2.2 1.8 1.7
Capex/depreciation (%) 206.3 287.0 800.0 15.4 172.7 66.4 64.9

Cashflow (Rpbn)
Operating profit 8 601 1,556 956 2,469 4,625 5,544
Operating adjustments 205 202 1,051 (355) (88) (88) (88)
Depreciation/amortisation 650 606 771 737 998 1,021 1,045
Working capital changes 105 (90) 1,945 (1,674) 482 (185) (63)
Interest paid / other financial expenses (319) (608) (1,130) (233) (854) (872) (890)
Tax paid (172) (318) (377) (493) (494) (1,152) (1,447)
Other non-cash operating items 3 (3,187) 164 186 0 0 0
Net operating cashflow 480 (2,795) 3,979 (877) 2,512 3,350 4,101
Capital expenditure (1,341) (1,740) (6,168) (113) (1,722) (679) (679)
Free cashflow (861) (4,535) (2,188) (991) 790 2,672 3,422
Acq/inv/disposals 444 (527) 1,556 1,700 - - -
Int, invt & associate div 343 260 261 120 120 174 258
Net investing cashflow (554) (2,008) (4,351) 1,707 (1,602) (504) (420)
Increase in loans (206) (506) 522 (1,364) 936 190 209
Dividends 0 (48) (48) (306) (216) (503) (632)
Net equity raised/others (184) 3,284 (1,354) 177 0 0 -
Net financing cashflow (390) 2,730 (880) (1,492) 720 (313) (422)
Incr/(decr) in net cash (464) (2,072) (1,252) (663) 1,631 2,534 3,258
Exch rate movements - - - - - - -
Opening cash 8,087 7,623 5,551 4,299 3,636 5,267 7,800
Closing cash 7,623 5,551 4,299 3,636 5,267 7,800 11,058
OCF PS (Rp) 40.1 (116.3) 165.6 (36.5) 104.5 139.4 170.6
FCF PS (Rp) (72.0) (188.7) (91.1) (41.2) 32.9 111.2 142.4
Cashflow ratio analysis

Growth (%)
Op cashflow growth (% YoY) nm (682.5) nm (122.0) nm 33.4 22.4
FCF growth (% YoY) - - - - - 238.2 28.1
Capex growth (%) (68.7) 29.8 254.4 (98.2) 1,418.4 (60.6) -
Capex/sales (%) 14.7 13.8 24.4 0.3 6.6 2.3 2.2
Capex/op cashflow (%) 279.5 (62.3) 155.0 (12.9) 68.6 20.3 16.5
Operating cashflow payout ratio (%) 0.0 - 1.2 - 8.6 15.0 15.4
Cashflow payout ratio (%) 0.0 - 1.2 - 8.6 15.0 15.4
Free cashflow payout ratio (%) - - - - 27.3 18.8 18.5
DuPont analysis
Ebit margin (%) 0.1 4.7 6.2 2.9 9.5 15.4 17.6
Asset turnover (x) 0.3 0.4 0.8 1.0 0.8 0.9 0.9
Interest burden (x) 29.1 0.8 1.1 0.7 0.7 0.8 0.9
Tax burden (x) 0.3 0.3 0.8 0.3 0.7 0.7 0.7
Return on assets (%) 0.0 0.6 3.9 0.9 5.6 9.8 10.8
Leverage (x) 1.6 1.6 1.7 1.7 1.7 1.6 1.6
ROE (%) 0.4 0.7 7.4 0.0 6.2 13.3 14.9
EVA® analysis
Ebit adj for tax 2 180 1,218 270 1,728 3,238 3,881
Average invested capital 17,844 19,265 22,125 23,639 23,635 23,678 23,447
ROIC (%) 0.0 0.9 5.5 1.1 7.3 13.7 16.6
Cost of equity (%) 15.5 15.5 15.5 15.5 15.5 15.5 15.5
Cost of debt (adj for tax) 1.9 2.1 5.5 2.0 4.9 4.9 4.9
Weighted average cost of capital (%) 12.4 12.4 13.2 12.4 13.1 13.1 13.1
EVA/IC (%) (12.4) (11.5) (7.7) (11.2) (5.7) 0.6 3.5
EVA (Rpbn) (2,204) (2,210) (1,699) (2,657) (1,357) 147 820

Notes

Astra
Rp5,775 - OUTPERFORM
Sarina Lesmina, CFA Year of recovery

sarina.lesmina@clsa.com Business units set to rebound after the 2020-dip
+62 21 5088 7820 As auto demand gradually comes back, government’s supportive measures
Handy Noverdanius together with Astra’s leading positions across different segments will sustain
+62 21 5088 7831 earnings recovery. Astra’s principal brand, Toyota, is at the forefront of hybrid
technology which allows Astra to dominate EV sales. Its planned investment in
local EV production could be a new source of growth in both domestic and export
markets. We maintain our Outperform rating and Rp6,100 target price. Astra
trades at 12.5x PE 21CL, at 1sd below historical mean.
Government offered tax break; central bank eased up on down-payment rules

23 March 2021 Domestic four-wheeler (4W) sales fell 48% YoY to 532,000 in 2020. After much
debate, the government finally decided to temporarily relax its luxury tax for mass-
Indonesia market passenger cars while the central bank also reduced down-payment
Conglomerates requirements. We expect to see a strong impact from those measures combined
with new model launches. We forecast a 35% YoY increase for Astra’s 4W sales
Reuters ASII.JK volume in 2021, ie, 70% of 2019 level.
Bloomberg ASII IJ
Priced on 19 March 2021 Dominating a range of auto segments
Jakarta Comp @ 6,356.2 Astra targets to maintain its 50% market share in auto sales which contribute to
12M hi/lo Rp6,800/3,280 half of its earnings. In the two-wheeler (2W) space, Astra’s market share kept rising
12M price target Rp6,100
to the latest 79%, given a lack of competition. Its heavy equipment arm United
±% potential +6% Tractors owns 31% of the heavy equipment segment and 21% of the mining
contracting market. In auto financing, its subsidiaries occupy 50% of the market for
Free float (est.) 49.9% 4W financing and 52.5% of 2W financing.
Market cap US$16.2bn EVs development starting to bear fruit
3M ADV US$25.7m Astra’s JV partner Toyota has been at the forefront of EV hybrid technology. The carmaker
Foreign s'holding 85.0% is getting close to having a full battery EV (BEV) portfolio, riding on the recently-
announced e-TNGA platform. It is also developing solid-state battery technology. In
Major shareholders
Jardine Cycle & Carriage 50.1%
Indonesia, its hybrid sales have been robust. EV market is still in its early days, but Toyota
has committed to invest US$2bn in local production in the next three years. Meanwhile,
Astra is also testing its 2W BEV with partners Grab, and Panasonic in Bali.
Maintain Outperform
Astra posted a slump in earnings last year, but we expect a good recovery in 2021,
Overall 66.9 although not to the 2019 level. We maintain our Outperform rating and target price
Country average 54.1 at Rp6,100, based on sum-of-the-parts valuation in 22CL. However, we assign a
GEM sector average 56.3 26% discount to its net asset value (NAV) taking into account Covid-related
uncertainties, and factoring in conglomerate discount. Our target price represents
Stock performance (%) 8.4% total return.
1M 3M 12M
Absolute 0.0 (6.9) 52.8 Financials
Relative (2.0) (10.5) 0.8 Year to 31 December 19A 20A 21CL 22CL 23CL
Abs (US$) (3.3) (8.9) 68.8 Revenue (Rpbn) 237,166 175,046 199,923 240,853 279,295
(Rp) Astra (LHS) (%)
9,000 115 Net profit (Rpbn) 21,707 16,163 18,766 23,965 27,645
Rel to Comp
110 EPS (Rp) 536.19 399.25 463.54 591.96 682.88
8,000
105
CL/consensus (16) (EPS%) - - 105 109 117
100
7,000
95
EPS growth (% YoY) 0.2 (25.5) 16.1 27.7 15.4
6,000 90 PE (x) 10.8 14.5 12.5 9.8 8.5
85 Dividend yield (%) 3.7 3.2 2.8 3.2 4.1
5,000
80 FCF yield (%) 4.4 12.3 2.1 4.0 4.2
75
4,000 PB (x) 1.6 1.5 1.4 1.3 1.2
70
3,000 65
ROE (%) 15.2 10.7 11.6 13.6 14.3
Mar 19 Nov 19 Jul 20 Mar 21 Net debt/equity (%) 36.1 15.5 16.1 14.8 14.5

Astra - O-PF Indonesia electric vehicles

Revenue 237,166 175,046 199,923 14.2 240,853 279,295
Cogs (ex-D&A) (177,277) (124,707) (144,304) (175,228) (203,851)
Gross Profit (ex-D&A) 59,889 50,339 55,619 10.5 65,625 75,444
SG&A and other expenses (24,055) (25,688) (21,678) (26,139) (30,970)
Op Ebitda 35,834 24,651 33,941 37.7 39,486 44,474
Depreciation/amortisation (9,650) (11,781) (12,548) (13,648) (14,748)
Op Ebit 26,184 12,870 21,393 66.2 25,838 29,726
Net interest inc/(exp) (2,429) (1,066) (264) (115) (34)
Other non-Op items 10,299 9,936 7,308 (26.5) 9,465 10,302
Profit before tax 34,054 21,740 28,437 30.8 35,188 39,994
Taxation (7,433) (3,170) (5,782) (7,096) (8,078)
Profit after tax 26,621 18,570 22,655 22 28,092 31,916
Minority interest (4,914) (2,407) (3,889) (4,128) (4,271)
Net profit 21,707 16,163 18,766 16.1 23,965 27,645
Adjusted profit 21,707 16,163 18,766 16.1 23,965 27,645
Cashflow (Rpbn) 2019A 2020A 2021CL (% YoY) 2022CL 2023CL
Operating profit 26,184 12,870 21,393 66.2 25,838 29,726
Depreciation/amortisation 9,650 11,781 12,548 6.5 13,648 14,748
Working capital changes (8,105) 5,136 (3,553) (596) (3,620)
Other items (4,121) 6,683 (13,916) (13,079) (14,439)
Net operating cashflow 23,608 36,470 16,472 (54.8) 25,811 26,415
Capital expenditure (13,242) (7,799) (11,500) (16,500) (16,500)
Free cashflow 10,366 28,671 4,972 (82.7) 9,311 9,915
M&A/Others (2,985) 18,962 1,517 (92) 1,148 535
Net investing cashflow (16,227) 11,163 (9,983) (15,352) (15,965)
Increase in loans 6,250 (13,870) 1,657 6,000 1,000
Dividends (8,547) (7,449) (6,465) (7,506) (9,586)
Net equity raised/other (5,890) (2,992) (3,272) (2,523) (2,506)
Net financing cashflow (8,187) (24,311) (8,080) (4,029) (11,092)
Incr/(decr) in net cash (806) 23,322 (1,590) 6,429 (642)
Exch rate movements (57) (99) 0 0 0
Balance sheet (Rpbn) 2019A 2020A 2021CL (% YoY) 2022CL 2023CL
Cash & equivalents 24,330 47,553 45,963 (3.3) 52,391 51,749
Accounts receivable 29,367 17,031 25,743 51.2 29,694 34,434
Other current assets 75,361 67,724 76,261 12.6 83,538 93,228
Fixed assets 84,597 80,615 79,567 (1.3) 82,420 84,172
Investments 45,683 33,483 34,425 2.8 35,658 37,058
Other non-current assets 92,620 91,797 100,977 10 111,074 122,182
Total assets 351,958 338,203 362,936 7.3 394,775 422,822
Short-term debt 41,596 36,260 37,032 2.1 39,827 40,293
Accounts payable 30,087 16,529 25,246 52.7 30,401 35,185
Other current liabs 28,279 32,947 34,265 4 37,691 41,461
Long-term debt/CBs 50,117 41,583 42,468 2.1 45,673 46,207
Provisions/other LT liabs 15,116 15,430 16,047 4 17,652 19,417
Minorities/other equity 38,916 39,792 39,915 0.3 39,110 37,780
Total liabs & equity 351,958 338,203 362,936 7.3 394,775 422,822
Revenue growth (% YoY) (0.9) (26.2) 14.2 20.5 16.0
Ebitda margin (%) 15.1 14.1 17.0 16.4 15.9
Ebit margin (%) 11.0 7.4 10.7 10.7 10.6
Net profit growth (%) 0.2 (25.5) 16.1 27.7 15.4
Op cashflow growth (% YoY) 53.2 54.5 (54.8) 56.7 2.3
Capex/sales (%) 5.6 4.5 5.8 6.9 5.9
Net debt/equity (%) 36.1 15.5 16.1 14.8 14.5
Net debt/Ebitda (x) 1.9 1.2 1.0 0.8 0.8
ROE (%) 15.2 10.7 11.6 13.6 14.3
ROIC (%) 9.5 5.1 7.9 8.9 9.6

Government relaxes luxury Under the scheme of relaxation on luxury goods sales tax (PPnBM) for passenger
goods sales tax temporarily car type 4x2 (<10 passengers) and sedans below 1,500cc with a minimum of 70%
local content: PPnBM is lowered to zero in March-May 2021, lowered by 50% in
June-Aug2021, and by 25% in Sep-Nov2021.
Tax break applies to Note that this applies to internal combustion engine (ICE) vehicles as electric
internal combustion engine vehicles (EVs) already enjoy 0% luxury tax rate. Without the tax break, luxury tax
(ICE) vehicles for passenger car type 4x2 with engine size <=1,500cc was 10%, while for sedans,
it was 30%. Low cost green car (LCGC) also already enjoy 0% luxury tax.
Models contributing one- Four models of Astra’s 4W also benefit from the new tax scheme, ie, Toyota Avanza,
third of Astra’s 4W sales Daihatsu Xenia, Toyota Rush and Daihatsu Terios. Combined, they contributed 31%
benefit from the tax break of Astra’s sales in 2020 and 35% in 2019. This year, we anticipate the launches of
small SUVs Toyota Raize and Daihatsu Rocky, and the revamped versions of Toyota
Avanza and Daihatsu Xenia, which are also covered by the tax break.
The central bank also The central bank has reduced down payment requirement from 10-25% to 0% for
reduced minimum down- regular vehicles financing at banks that has NPL of below 5%. For banks with higher
payment requirements NPL, minimum down payment was cut by 10%. That said, actual operations depend
on each bank’s risk appetite.
Astra’s 4W market share Astra’s 2W market share

60 (%) 85 (%)
58 80
56 75
54
70
52
65
50
60
48
55
46
44 50
42 45
40 40
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Except for 2020 when Earnings contribution by segment

Covid-19 struck, automotive 80 (%) Auto (incl components) Financial services
contributed to about 50% United Tractors Astra Agro
of Astra’s earnings 70
Others
60
50
40
Automotive, including auto
financing, made up 55-60% 30
of Astra’s earnings 20
10
0
(10)
1Q20
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
FY20
1H20
9M20
Source: Company

Astra’s 4W sales by brand EV 4W sales by brand (Toyota, Lexus are under Astra)
Isuzu Others Nissan BMW Hyundai

6% 0.1% 12% 0.5% 9%
Lexus
8%
Mitsubishi
0.5%
Daihatsu
34%
Toyota
60%
Toyota
71%
Note: Toyota includes Lexus. Source: Company Note: Tesla’s sales are not captured by Gaikindo. Source: Gaikindo
Sum-of-the-parts valuation
(Rpbn) 22CL earnings Multiple Valuation Ownership Value of Note
(100%) (x) (100%) (%) Astra's stake
Astra Honda 6,715 17.0 114,155 50.0 57,078 @Market PE
Auto distribution/retail 1,869 17.0 31,778 100.0 31,778
Federal International Finance 3,274 17.0 55,657 100.0 55,657
Sedaya Multi Investama 1,287 17.0 21,882 100.0 21,882
Astra Sedaya Finance 2,187 17.0 37,180 100.0 37,180
Toyota Astra Motor - wholesale 1,766 17.0 30,024 51.0 15,312
Astra Daihatsu Motor 3,688 17.0 62,695 31.9 19,981
Others 600 17.0 10,200 100.0 10,200
Listed subsidiaries CLSA target
(Rp/share)
United Tractors 28,200 105,190 59.5 62,588 CLSA target
Astra Agro 11,250 17,716 79.7 14,116
Astra Otoparts 1,050 4,049 95.7 3,872
Total assets 329,646
Parent's cash 15,000
Parent's debt (10,000)
Net assets 334,646
No. of shares outstanding (m) 40,484
NAV per share (Rp) 8,266
Target price 6,100
Premium (discount) (26) Discount reflects uncertainty on
to NAV (%) recovery from Covid-19 and
conglomerate-type discount
Source: CLSA
We have since early 2020 We have since early 2020 derated Astra’s valuation due to the outbreak of Covid-
derated Astra’s valuation 19. Pre-pandemic historical mean PE was close to 17x, versus the current 15x.
due to Covid-19

ASII PE band ASII PB band
22 (x) 3.2 (x)
3.0
20
2.8
2.6 +1sd 2.58x
18
+1sd 17.36x 2.4
16 2.2
avg 2.06x
avg 14.99x 2.0
14 1.8
-1sd 12.61x
1.6 -1sd 1.55x
12
1.4
1.2
10
1.0
8 0.8
Mar 16 Jan 17 Nov 17 Sep 18 Jul 19 May 20 Mar 21 Mar 16 Jan 17 Nov 17 Sep 18 Jul 19 May 20 Mar 21
Valuation details
We apply a sum-of-the-parts valuation of the company's business profits with a
forward multiple of 17x, which is its pre-Covid-19 historical mean. However, we
impose a 26% discount on the valuation, taking into account Covid-related
uncertainties, such as the speed of mass vaccination roll-out, and factoring in
conglomerate discount.
Investment risks
Apart from the negative impact brought by Covid-19 in the near term, intensifying
competition in the auto industry could diminish Astra's four-wheeler market share
in the medium term. Two-wheeler growth may be limited, given high penetration.
Commodity price volatility also presents a risk to the company's commodity-related
business.

Detailed financials
Revenue 206,057 239,205 237,166 175,046 199,923 240,853 279,295
Cogs (ex-D&A) (157,178) (180,472) (177,277) (124,707) (144,304) (175,228) (203,851)
Gross Profit (ex-D&A) 48,879 58,733 59,889 50,339 55,619 65,625 75,444
Selling & marketing expenses (22,042) (23,901) (24,055) (25,688) (21,678) (26,139) (30,970)
Other SG&A - - - - - - -
Other Op Expenses ex-D&A 0 0 0 0 - - -
Op Ebitda 26,837 34,832 35,834 24,651 33,941 39,486 44,474
Depreciation/amortisation (6,511) (7,964) (9,650) (11,781) (12,548) (13,648) (14,748)
Op Ebit 20,326 26,868 26,184 12,870 21,393 25,838 29,726
Interest income 1,982 1,859 1,953 2,342 3,000 3,200 3,400
Interest expense (2,042) (3,105) (4,382) (3,408) (3,264) (3,315) (3,434)
Net interest inc/(exp) (60) (1,246) (2,429) (1,066) (264) (115) (34)
Associates/investments 6,694 7,036 7,087 3,083 4,708 6,165 7,002
Forex/other income (9) (87) (57) (99) 0 0 0
Asset sales/other cash items 2,186 2,424 3,269 6,952 2,600 3,300 3,300
Provisions/other non-cash items - - - - - - -
Profit before tax 29,137 34,995 34,054 21,740 28,437 35,188 39,994
Taxation (6,016) (7,623) (7,433) (3,170) (5,782) (7,096) (8,078)
Profit after tax 23,121 27,372 26,621 18,570 22,655 28,092 31,916
Preference dividends 0 0 0 0 0 0 0
Profit for period 23,121 27,372 26,621 18,570 22,655 28,092 31,916
Minority interest (4,274) (5,699) (4,914) (2,407) (3,889) (4,128) (4,271)
Net profit 18,847 21,673 21,707 16,163 18,766 23,965 27,645
Profit avail to ordinary shares 18,847 21,673 21,707 16,163 18,766 23,965 27,645
Dividends (6,801) (7,692) (8,547) (7,449) (6,465) (7,506) (9,586)
Retained profit 12,046 13,981 13,160 8,714 12,301 16,458 18,059
Adjusted profit 18,847 21,673 21,707 16,163 18,766 23,965 27,645
EPS (Rp) 465.5 535.4 536.2 399.2 463.5 592.0 682.9
Adj EPS [pre excep] (Rp) 465.5 535.4 536.2 399.2 463.5 592.0 682.9
Core EPS (Rp) 465.5 535.4 536.2 399.2 463.5 592.0 682.9
DPS (Rp) 168.0 190.0 211.1 184.0 159.7 185.4 236.8

Growth (%)
Revenue growth (% YoY) 13.8 16.1 (0.9) (26.2) 14.2 20.5 16.0
Ebitda growth (% YoY) 12.9 29.8 2.9 (31.2) 37.7 16.3 12.6
Ebit growth (% YoY) 15.9 32.2 (2.5) (50.8) 66.2 20.8 15.0
Net profit growth (%) 24.4 15.0 0.2 (25.5) 16.1 27.7 15.4
EPS growth (% YoY) 24.4 15.0 0.2 (25.5) 16.1 27.7 15.4
Adj EPS growth (% YoY) 24.4 15.0 0.2 (25.5) 16.1 27.7 15.4
DPS growth (% YoY) 0.0 13.1 11.1 (12.8) (13.2) 16.1 27.7
Core EPS growth (% YoY) 24.4 15.0 0.2 (25.5) 16.1 27.7 15.4
Margins (%)
Gross margin (%) 23.7 24.6 25.3 28.8 27.8 27.2 27.0
Ebitda margin (%) 13.0 14.6 15.1 14.1 17.0 16.4 15.9
Ebit margin (%) 9.9 11.2 11.0 7.4 10.7 10.7 10.6
Net profit margin (%) 9.1 9.1 9.2 9.2 9.4 9.9 9.9
Core profit margin 9.1 9.1 9.2 9.2 9.4 9.9 9.9
Op cashflow margin 9.7 6.4 10.0 20.8 8.2 10.7 9.5
Returns (%)
ROE (%) 16.0 16.6 15.2 10.7 11.6 13.6 14.3
ROA (%) 5.8 6.6 5.9 3.2 4.9 5.4 5.8
ROIC (%) 10.0 11.1 9.5 5.1 7.9 8.9 9.6
ROCE (%) 10.7 12.4 10.7 5.4 9.2 10.4 11.2
Ebitda/net int exp (x) 447.3 28.0 14.8 23.1 128.7 343.4 1,308.1
Exceptional or extraord. inc/PBT (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Dividend payout (%) 36.1 35.5 39.4 46.1 34.5 31.3 34.7

Balance sheet (Rpbn)

Cash & equivalents 31,574 25,193 24,330 47,553 45,963 52,391 51,749
Accounts receivable 25,351 31,220 29,367 17,031 25,743 29,694 34,434
Inventories 19,504 26,505 24,287 17,929 21,487 23,286 26,951
Other current assets 44,864 50,691 51,074 49,795 54,775 60,252 66,277
Current assets 121,293 133,609 129,058 132,308 147,967 165,624 179,411
Fixed assets 61,360 81,005 84,597 80,615 79,567 82,420 84,172
Investments 39,260 40,358 45,683 33,483 34,425 35,658 37,058
Goodwill 0 0 0 0 0 0 0
Other non-current assets 73,733 89,739 92,620 91,797 100,977 111,074 122,182
Total assets 295,646 344,711 351,958 338,203 362,936 394,775 422,822
Short term loans/OD 43,538 45,414 41,596 36,260 37,032 39,827 40,293
Accounts payable 29,468 42,263 30,087 16,529 25,246 30,401 35,185
Taxes payable 0 0 0 0 0 0 0
Other current liabs 25,716 28,790 28,279 32,947 34,265 37,691 41,461
Current liabilities 98,722 116,467 99,962 85,736 96,543 107,919 116,938
Long-term debt/leases/other 31,380 40,049 50,117 41,583 42,468 45,673 46,207
Convertible bonds 0 0 0 0 0 0 0
Provisions/other LT liabs 9,215 13,832 15,116 15,430 16,047 17,652 19,417
Total liabilities 139,317 170,348 165,195 142,749 155,058 171,244 182,562
Share capital 2,024 2,024 2,024 2,024 2,024 2,024 2,024
Reserves/others 8,193 7,191 5,336 4,570 4,570 4,570 4,570
Minorities/other equity 32,684 37,416 38,916 39,792 39,915 39,110 37,780
Total equity 156,329 174,363 186,763 195,454 207,877 223,531 240,260
Total debt 74,918 85,463 91,713 77,843 79,500 85,500 86,500
Net debt 43,344 60,270 67,383 30,290 33,537 33,109 34,751
Adjusted EV 250,931 270,942 271,567 253,650 255,608 252,525 250,736
BVPS (Rp) 3,054.2 3,382.8 3,652.0 3,845.1 4,148.9 4,555.5 5,001.5

Key ratios
Current ratio (x) 1.2 1.1 1.3 1.5 1.5 1.5 1.5
Growth in total assets (% YoY) 12.9 16.6 2.1 (3.9) 7.3 8.8 7.1
Growth in capital employed (% YoY) 10.5 17.5 8.3 (11.2) 6.9 6.3 7.2
Net debt to operating cashflow (x) 2.2 3.9 2.9 0.8 2.0 1.3 1.3
Gross debt to operating cashflow (x) 3.8 5.5 3.9 2.1 4.8 3.3 3.3
Gross debt to Ebitda (x) 2.8 2.5 2.6 3.2 2.3 2.2 1.9
Net debt/Ebitda (x) 1.6 1.7 1.9 1.2 1.0 0.8 0.8
Gearing
Net debt/equity (%) 27.7 34.6 36.1 15.5 16.1 14.8 14.5
Interest cover (x) 10.9 9.3 6.4 4.5 7.5 8.8 9.6
Debt cover (x) 0.3 0.2 0.3 0.5 0.2 0.3 0.3
Net cash per share (Rp) (1,070.7) (1,488.8) (1,664.5) (748.2) (828.4) (817.8) (858.4)
Inventory days 41.6 44.6 49.6 56.4 45.9 43.3 41.9
Debtor days 39.2 43.2 46.6 48.4 39.0 42.0 41.9
Creditor days 57.9 69.5 70.6 62.3 48.6 53.8 54.8
Other ratios (%)
PB (x) 1.9 1.7 1.6 1.5 1.4 1.3 1.2
EV/Ebitda (x) 9.4 7.8 7.6 10.3 7.5 6.4 5.6
EV/OCF (x) 12.6 17.6 11.5 7.0 15.5 9.8 9.5
EV/FCF (x) 42.2 (22.2) 26.2 8.8 51.4 27.1 25.3
EV/Sales (x) 1.2 1.1 1.1 1.4 1.3 1.0 0.9

Cashflow (Rpbn)
Operating profit 20,326 26,868 26,184 12,870 21,393 25,838 29,726
Operating adjustments - - - - - - -
Depreciation/amortisation 6,511 7,964 9,650 11,781 12,548 13,648 14,748
Working capital changes (1,159) (75) (8,105) 5,136 (3,553) (596) (3,620)
Interest paid / other financial expenses - - - - - - -
Tax paid (6,016) (7,623) (7,433) (3,170) (5,782) (7,096) (8,078)
Other non-cash operating items 312 (11,723) 3,312 9,853 (8,134) (5,983) (6,361)
Net operating cashflow 19,974 15,411 23,608 36,470 16,472 25,811 26,415
Capital expenditure (14,034) (27,609) (13,242) (7,799) (11,500) (16,500) (16,500)
Free cashflow 5,940 (12,198) 10,366 28,671 4,972 9,311 9,915
Acq/inv/disposals (7,577) (3,387) (9,530) 9,349 (4,585) (6,970) (8,333)
Int, invt & associate div 9,159 8,199 6,545 9,613 6,102 8,117 8,868
Net investing cashflow (12,452) (22,797) (16,227) 11,163 (9,983) (15,352) (15,965)
Increase in loans 4,755 10,545 6,250 (13,870) 1,657 6,000 1,000
Dividends (6,801) (7,692) (8,547) (7,449) (6,465) (7,506) (9,586)
Net equity raised/others (3,250) (1,761) (5,890) (2,992) (3,272) (2,523) (2,506)
Net financing cashflow (5,296) 1,092 (8,187) (24,311) (8,080) (4,029) (11,092)
Incr/(decr) in net cash 2,226 (6,294) (806) 23,322 (1,590) 6,429 (642)
Exch rate movements (9) (87) (57) (99) 0 0 0
Opening cash 29,357 31,574 25,193 24,330 47,553 45,963 52,391
Closing cash 31,574 25,193 24,330 47,553 45,963 52,391 51,749
OCF PS (Rp) 493.4 380.7 583.2 900.9 406.9 637.6 652.5
FCF PS (Rp) 146.7 (301.3) 256.1 708.2 122.8 230.0 244.9

Growth (%)
Op cashflow growth (% YoY) 6.3 (22.8) 53.2 54.5 (54.8) 56.7 2.3
FCF growth (% YoY) (43.9) (305.4) - 176.6 (82.7) 87.3 6.5
Capex growth (%) 70.9 96.7 (52.0) (41.1) 47.5 43.5 0.0
Capex/sales (%) 6.8 11.5 5.6 4.5 5.8 6.9 5.9
Capex/op cashflow (%) 70.3 179.2 56.1 21.4 69.8 63.9 62.5
Operating cashflow payout ratio (%) 34.1 49.9 36.2 20.4 39.3 29.1 36.3
Cashflow payout ratio (%) 34.1 49.9 36.2 20.4 39.3 29.1 36.3
Free cashflow payout ratio (%) 114.5 - 82.5 26.0 130.0 80.6 96.7
DuPont analysis
Ebit margin (%) 9.9 11.2 11.0 7.4 10.7 10.7 10.6
Asset turnover (x) 0.7 0.7 0.7 0.5 0.6 0.6 0.7
Tax burden (x) 0.8 0.8 0.8 0.9 0.8 0.8 0.8
Return on assets (%) 5.8 6.6 5.9 3.2 4.9 5.4 5.8
Leverage (x) 1.9 1.9 1.9 1.8 1.7 1.8 1.8
ROE (%) 16.0 16.6 15.2 10.7 11.6 13.6 14.3
EVA® analysis
Ebit adj for tax 16,129 21,015 20,469 10,993 17,043 20,628 23,722
ROIC (%) 10.0 11.1 9.5 5.1 7.9 8.9 9.6
Cost of equity (%) 15.3 15.3 15.3 15.3 15.3 15.3 15.3
EVA/IC (%) (3.8) (2.6) (4.2) (8.8) (5.8) (4.8) (4.2)
EVA (Rpbn) (6,151) (4,890) (9,134) (18,978) (12,576) (11,129) (10,394)

Vale Indonesia
Rp4,500 - BUY
Norman Choong, CFA Great price proxy

norman.choong@clsa.com To rerate on structurally higher nickel price
+62 21 5088 7827 Vale Indonesia (Vale) is a cost-efficient class-1 nickel producer and well-positioned
Chelene Indriani to benefit from rising LME nickel prices. We believe recent nickel price increases
+62 21 5088 7812 are structural in nature and could bolster Vale’s profitability in the medium- to
long-run. The company targets to settle the final investment decision (FID) for a
c.40,000-tonne high-pressure acid leach (HPAL) plant by mid-2021, expanding its
already-fully-utilised capacity. We forecast 25-57% Ebitda growth in 21-22CL,
assuming average nickel prices of US$18.5-19.5k/t, and reiterate our BUY rating.
Effective cost and production management

23 March 2021
One of the few class-1 nickel producers in Asia, Vale is highly cost-efficient. In
Indonesia 1H20, it managed to reduce cash costs per tonne by 20% YoY to US$6,500/tonne
on the back of lower oil prices. Production and sales volume also expanded 19%
Materials YoY despite furnace leakage issues since 2018. As a result, 9M20 Ebitda tripled.
Reuters INCO.JK
Bloomberg INCO IJ Sizeable volume growth by 2023-24
Priced on 19 March 2021 Vale will be busy in 2021 as it has postponed the reconstruction of furnace 4 from 2020
Jakarta Comp @ 6,356.2 to this year due to the Covid-19’s social distancing rule. The company targets to confirm
12M hi/lo Rp6,725/1,450 the FID for its 40,000-tonne HPAL plant in Pahadobi by mid-2021 (to commence
Rp8,600
operation in 2024) and a 60,000-tonne ferronickel JV in Pomala (to commence
12M price target
±% potential +91% operation in 2023). Vale’s current annual nickel matte capacity of 80,000 tonnes has
been fully utilised since years ago. The company is in a net cash position and would
Free float (est.) 20.5% fund most of the capex with internal cash.
Market cap US$3.1bn
Great price proxy with good free cashflow
3M ADV US$20.2m Our sensitivity test indicates that for each US$1,000/t movement in yearly average
Foreign s'holding 99.0% nickel price, Vale will book additional 12/15% in Ebitda/NPAT. We estimate its FCF
Major shareholders yield to be 5% with nickel price at US$19k/t for 22CL (spot: US$20k/t). We also
Vale Canada Limited 58.7% expect Vale to resume dividend payment after a decade-long suspension.
Sumitomo Metal Mining Co., Ltd. 20.1%
Maintain BUY
We base our Rp8,600 target price on a 10x 22CL EV/Ebitda multiple, 1sd above the
stock’s ten-year average. This reflects our view that recent nickel price rises are
structural in nature. Hence, we assume an average of US$19k/t for 2022 and a
Overall 61.3
Country average 54.1 medium- to long-term estimate of US$20k/t. The last time Vale was traded at 1sd
GEM sector average 72.2 above its 10-year average was in 2013-16 when the government first introduced
an ore export ban, prior to which was in 2009-11, when nickel price was at
Stock performance (%) US$25k/t post the global financial crisis.
1M 3M 12M
Absolute (28.9) (16.3) 198.0 Financials
Relative (30.2) (19.6) 96.7 Year to 31 December 18A 19A 20CL 21CL 22CL
Abs (US$) (31.2) (18.1) 229.3 Revenue (US$m) 777 782 797 982 1,154
8,000 (Rp) (%) 220 Net profit (US$m) 61 57 101 187 248
Vale Indonesia 200 EPS (US¢) 0.61 0.58 1.01 1.88 2.49
7,000
Rel to Comp (RHS) 180
6,000 CL/consensus (9) (EPS%) - - 113 134 178
160
EPS growth (% YoY) nm (5.1) 75.7 85.2 32.6
5,000 140
PE (x) 52.1 55.1 30.6 16.0 12.0
4,000 120
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0
100
3,000 FCF yield (%) 3.6 (1.1) (0.8) (0.4) 6.8
80
2,000 PB (x) 1.7 1.6 1.5 1.3 1.2
60
1,000 40
ROE (%) 3.3 3.0 5.1 8.7 10.5
Mar 19 Nov 19 Jul 20 Mar 21 Net cash per share (US¢) 2.7 2.5 2.3 2.3 4.4

Vale Indonesia - BUY Indonesia electric vehicles
Profit & Loss (US$m)

Revenue 777 782 797 1.9 982 1,154
Cogs (ex-D&A) (544) (533) (499) (518) (573)
Gross Profit (ex-D&A) 233 249 298 20 465 581
SG&A and other expenses (12) (14) (14) (17) (19)
Op Ebitda 221 235 285 21.1 448 562
Depreciation/amortisation (129) (132) (101) (108) (112)
Op Ebit 92 103 183 78.3 340 450
Net interest inc/(exp) (2) 1 4 363.9 4 4
Other non-Op items (8) (14) (4) (4) (4)
Profit before tax 83 89 183 105.7 339 450
Taxation (22) (32) (82) (153) (203)
Profit after tax 61 57 101 75.7 187 248
Minority interest 0 0 0 0 0
Net profit 61 57 101 75.7 187 248
Adjusted profit 61 57 101 75.7 187 248
Cashflow (US$m) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Operating profit 92 103 183 78.3 340 450
Depreciation/amortisation 129 132 101 (23.3) 108 112
Working capital changes 67 (16) 2 (27) (27)
Other items (91) (89) (86) (157) (206)
Net operating cashflow 197 130 200 53.7 265 329
Capital expenditure (84) (166) (225) (275) (125)
Free cashflow 113 (36) (25) (11) 204
M&A/Others 5 5 4 (17.4) 4 4
Net investing cashflow (79) (161) (221) (272) (122)
Increase in loans (38) (21) (1) 5 4
Dividends 0 0 0 0 0
Net equity raised/other 0 0 0 0 0
Net financing cashflow (37) (21) (1) 5 4
Incr/(decr) in net cash 80 (53) (22) (2) 211
Exch rate movements (1) - - - -
Balance sheet (US$m) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Cash & equivalents 301 249 227 (9) 224 435
Accounts receivable 124 107 109 1.9 135 158
Other current assets 190 232 217 (6.4) 223 236
Fixed assets 1,435 1,467 1,591 8.4 1,758 1,772
Investments - - - - -
Other non-current assets 153 167 168 0.2 168 168
Total assets 2,202 2,223 2,312 4 2,508 2,770
Short-term debt 37 1 - - -
Accounts payable 91 97 88 (9.9) 92 100
Other current liabs 46 39 38 (4.1) 38 40
Long-term debt/CBs - - - - -
Provisions/other LT liabs 143 144 145 0.3 149 153
Minorities/other equity 0 0 0 0 0
Total liabs & equity 2,202 2,223 2,312 4 2,508 2,770
Revenue growth (% YoY) 23.4 0.7 1.9 23.2 17.4
Ebitda margin (%) 28.5 30.0 35.7 45.6 48.7
Ebit margin (%) 11.9 13.1 23.0 34.6 39.1
Net profit growth (%) nm (5.1) 75.7 85.2 32.6
Op cashflow growth (% YoY) 35.3 (33.9) 53.7 32.4 24.3
Capex/sales (%) 10.8 21.2 28.3 28.0 10.9
Net debt/equity (%) (14.0) (12.8) (11.1) (10.1) (17.6)
Net debt/Ebitda (x) - - - - -
ROE (%) 3.3 3.0 5.1 8.7 10.5
ROIC (%) 3.7 3.7 5.3 9.1 11.4

Vale’s sensitivity to nickel price

22CL
Nickel price assumption (US$/t) 16,000 17,000 18,000 18,500 19,000 20,000 21,000 22,000 23,000 24,000 25,000
Ebitda - 22CL (US$m) 388 447 506 535 562 623 669 727 786 844 902
NPAT - 22CL (US$m) 152 184 217 233 248 281 307 339 371 403 434
Source: CLSA
Vale EV/Ebitda band Nickel price movement
20 (x) 30,000 (US$/t)
28,000
18
26,000
16
24,000
14
22,000
12 20,000
+1sd 10.91x
10 18,000
avg 8.35x 16,000
8
14,000
6 -1sd 5.79x
12,000
4
10,000
2 8,000
Feb 11 Oct 12 Jun 14 Feb 16 Oct 17 Jun 19 Feb 21 Feb 11 Oct 12 Jun 14 Feb 16 Oct 17 Jun 19 Feb 21
Source: CLSA Source: CLSA, Bloomberg
TP is based on 10x We base our price target on 10x EV/Ebitda, close to 1sd above the stock’s 10-year
EV/Ebitda, close to 1sd average, and apply this to our 2022 forecasts. The 1sd above multiple reflects our
above Vale’s 10-year avg view that Vale’s profitability is likely to be structurally higher than before in the
foreseeable future. Its 22CL 48% Ebitda margin is above the previous high of 40%
back in 2014 and closing in on the 42-54% range in 2009-2010. We believe the
improvement is set to continue with our 21-22CL nickel price forecast of 18.5-
19k/t and a mid- to long-term forecast of US$20k/t. Our nickel price forecasts are
made based on rising demand for EVs, post-pandemic economic recovery, as well
as a soft US dollar that would support US$-denominated nickel prices.
We believe the current Vale was traded at 1sd above 10-year average back in 2013-2016, when the ore
nickel price rally is export ban was first introduced; and also in 2009-11 when nickel price was at
structural in nature US$25k/t, recovered from the global financial crisis (GFC). We believe the current
nickel price rally is structural in nature and similar to the one post-GFC.
We maintain our target Vale summary of target derivation

price at Rp8,600 Ebitda, 22CL (US$m) 562
Target multiple (x) 10
EV (US$m) 5,621
Plus net cash (US$m) 224
Equity value (US$m) 5,847
Num shares (million) 9,936
Exch rate (Rp/US$) 15,000
Value per share (Rp/share) 8,600
Source: CLSA

The Street have been CLSA’s 21-22CL net profit estimates are 34-78% above consensus. We believe this
upgrading nickel price is a combined result of the Street’s delay in updating forecast to latest management
assumptions, we expect target and assuming lower average nickel prices. We estimate the Street are
more to follow
assuming nickel price of US$15k/t on average, already higher than previous
assumptions of US$12-13k/t. Meanwhile, we expect to see average nickel price
reaching US$18.5-19k in 21-22CL and continue to rise after that. Our expectation
is based on data showing strong demand for EVs and a bottle neck in class-1 nickel
supply expansion. Class-1 nickel is cheaper to produce and has lower carbon
emission in its production process.
Valuation details
Our TP is based on a 10x We base our target price on a 10x EV/Ebitda, close to 1sd above the stock’s 10-
EV/Ebitda 22CL year average, applying this to our 2022 forecasts. The 1sd above multiple reflects
our view that Vale’s profitability would be structurally higher than before in the
foreseeable future, with its 22CL 48% Ebitda margin already higher than the
previous high of 40% in 2014 and closing in to the 42-54% range in 2009-10. We
also expect such improvement to continue as we forecast average nickel price to
reach US$18.5-19k/t in 21-22CL, and US$20k/t in the medium- to long-term. Our
forecast on nickel price is based on data showing strong demand for EVs, possible
Investment risks
The biggest risk is nickel The biggest risk is nickel price volatility. This includes resurfacing of supplies from
price volatility overseas producers who failed to generate positive cashflow previously. The
government's decision to lift the ban on mineral-ore exports had sparked a sell-off
of nickel futures and Vale’s stock. Further relaxation of the export ban would be
detrimental to the company and the industry dynamics. A prolonged pandemic may
lower nickel demand and price, hence, harming the company’s earnings.

Detailed financials
Profit & Loss (US$m)
Revenue 584 629 777 782 797 982 1,154
Cogs (ex-D&A) (427) (496) (544) (533) (499) (518) (573)
Gross Profit (ex-D&A) 158 133 233 249 298 465 581
Selling & marketing expenses - - - - - - -
Other SG&A (12) (11) (12) (14) (14) (17) (19)
Other Op Expenses ex-D&A 0 - - - - - -
Op Ebitda 145 122 221 235 285 448 562
Depreciation/amortisation (123) (127) (129) (132) (101) (108) (112)
Op Ebit 22 (5) 92 103 183 340 450
Interest income 2 3 5 5 4 4 4
Interest expense (9) (8) (7) (4) 0 0 0
Net interest inc/(exp) (7) (5) (2) 1 4 4 4
Associates/investments - - - - - - -
Forex/other income 3 0 6 - - - -
Asset sales/other cash items (12) (14) (13) (14) (4) (4) (4)
Provisions/other non-cash items - - - - - - -
Profit before tax 5 (23) 83 89 183 339 450
Taxation (3) 8 (22) (32) (82) (153) (203)
Profit after tax 2 (15) 61 57 101 187 248
Preference dividends - - - - - - -
Profit for period 2 (15) 61 57 101 187 248
Minority interest 0 0 0 0 0 0 0
Net profit 2 (15) 61 57 101 187 248
Profit avail to ordinary shares 2 (15) 61 57 101 187 248
Dividends 0 0 0 0 0 0 0
Retained profit 2 (15) 61 57 101 187 248
Adjusted profit 2 (15) 61 57 101 187 248
EPS (US¢) 0.0 (0.2) 0.6 0.6 1.0 1.9 2.5
Adj EPS [pre excep] (US¢) 0.0 (0.2) 0.6 0.6 1.0 1.9 2.5
Core EPS (US¢) 0.0 (0.2) 0.6 0.6 1.0 1.9 2.5
DPS (US¢) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Growth (%)
Revenue growth (% YoY) (26.0) 7.7 23.4 0.7 1.9 23.2 17.4
Ebitda growth (% YoY) (36.2) (16.3) 81.7 6.1 21.1 57.5 25.4
Ebit growth (% YoY) (79.4) (121.8) nm 11.1 78.3 85.4 32.6
Net profit growth (%) (96.2) (901.2) nm (5.1) 75.7 85.2 32.6
EPS growth (% YoY) (96.2) (901.3) nm (5.1) 75.7 85.2 32.6
Adj EPS growth (% YoY) (96.2) (901.3) nm (5.1) 75.7 85.2 32.6
DPS growth (% YoY) (100.0) - - - - - -
Core EPS growth (% YoY) (96.2) (901.3) nm (5.1) 75.7 85.2 32.6
Margins (%)
Gross margin (%) 27.0 21.2 30.0 31.8 37.4 47.3 50.4
Ebitda margin (%) 24.9 19.4 28.5 30.0 35.7 45.6 48.7
Ebit margin (%) 3.8 (0.8) 11.9 13.1 23.0 34.6 39.1
Net profit margin (%) 0.3 (2.4) 7.8 7.3 12.6 19.0 21.5
Core profit margin 0.3 (2.4) 7.8 7.3 12.6 19.0 21.5
Op cashflow margin 3.0 23.1 25.3 16.6 25.1 26.9 28.5
Returns (%)
ROE (%) 0.1 (0.8) 3.3 3.0 5.1 8.7 10.5
ROA (%) 0.4 (0.1) 3.1 3.0 4.4 7.8 9.4
ROIC (%) 0.4 (0.2) 3.7 3.7 5.3 9.1 11.4
ROCE (%) 1.3 (0.3) 5.6 6.2 10.3 17.6 22.0
Ebitda/net int exp (x) 20.1 24.2 99.0 - - - -
Exceptional or extraord. inc/PBT (%) - - - - - - -
Dividend payout (%) 0.0 - 0.0 0.0 0.0 0.0 0.0

Balance sheet (US$m)

Cash & equivalents 186 222 301 249 227 224 435
Accounts receivable 147 166 124 107 109 135 158
Inventories 130 118 132 148 133 139 152
Other current assets 107 76 58 84 84 84 84
Current assets 569 581 615 588 553 582 830
Fixed assets 1,533 1,494 1,435 1,467 1,591 1,758 1,772
Investments - - - - - - -
Goodwill 0 0 0 0 0 0 0
Other non-current assets 123 110 153 167 168 168 168
Total assets 2,225 2,185 2,202 2,223 2,312 2,508 2,770
Short term loans/OD 36 37 37 1 - - -
Accounts payable 64 61 91 97 88 92 100
Taxes payable 1 2 3 2 2 2 2
Other current liabs 13 15 18 21 21 21 21
Current liabilities 132 129 174 137 125 130 140
Long-term debt/leases/other 73 36 - - - - -
Convertible bonds - - - - - - -
Provisions/other LT liabs 186 200 143 144 145 149 153
Total liabilities 391 365 317 282 270 279 293
Share capital 414 414 414 414 414 414 414
Reserves/others 27 27 29 27 27 27 27
Minorities/other equity 0 0 0 0 0 0 0
Total equity 1,835 1,819 1,885 1,941 2,042 2,229 2,476
Total debt 110 73 37 1 0 0 0
Net debt (76) (149) (265) (248) (227) (224) (435)
Adjusted EV 3,287 3,194 2,890 2,914 2,855 2,757 2,545
BVPS (US¢) 18.5 18.3 19.0 19.5 20.6 22.4 24.9

Key ratios
Current ratio (x) 4.3 4.5 3.5 4.3 4.4 4.5 5.9
Growth in total assets (% YoY) (2.8) (1.8) 0.8 0.9 4.0 8.5 10.4
Growth in capital employed (% YoY) (1.1) (4.2) (3.3) 5.7 7.2 10.6 2.0
Net debt to operating cashflow (x) - - - - - - -
Gross debt to operating cashflow (x) 6.2 0.5 0.2 0.0 - - -
Gross debt to Ebitda (x) 0.8 0.6 0.2 0.0 - - -
Net debt/Ebitda (x) - - - - - - -
Gearing
Net debt/equity (%) (4.1) (8.2) (14.0) (12.8) (11.1) (10.1) (17.6)
Interest cover (x) 2.6 (0.3) 14.3 27.5 0.0 0.0 0.0
Debt cover (x) 0.2 2.0 5.4 137.3 0.0 0.0 0.0
Net cash per share (US¢) 0.8 1.5 2.7 2.5 2.3 2.3 4.4
Inventory days 77.6 72.5 67.7 76.7 85.6 79.5 77.7
Debtor days 70.2 90.5 68.1 54.0 49.6 45.4 46.4
Creditor days 49.7 36.7 41.3 51.7 56.3 52.3 51.2
Other ratios (%)
PB (x) 1.8 1.8 1.7 1.6 1.5 1.3 1.2
EV/Ebitda (x) 22.6 26.2 13.1 12.4 10.0 6.2 4.5
EV/OCF (x) 187.2 22.0 14.7 22.4 14.3 10.4 7.7
EV/FCF (x) 87.7 45.2 25.6 (80.8) (112.1) (259.0) 12.5
EV/Sales (x) 5.6 5.1 3.7 3.7 3.6 2.8 2.2

Cashflow (US$m)
Operating profit 22 (5) 92 103 183 340 450
Operating adjustments - - - - - - -
Depreciation/amortisation 123 127 129 132 101 108 112
Working capital changes (198) 42 67 (16) 2 (27) (27)
Interest paid / other financial expenses 6 (5) (3) (3) 0 0 0
Tax paid 79 (3) (35) (43) (82) (153) (203)
Other non-cash operating items (15) (11) (53) (43) (4) (4) (4)
Net operating cashflow 18 145 197 130 200 265 329
Capital expenditure 20 (75) (84) (166) (225) (275) (125)
Free cashflow 37 71 113 (36) (25) (11) 204
Acq/inv/disposals - - - - - - -
Int, invt & associate div 2 3 5 5 4 4 4
Net investing cashflow 22 (72) (79) (161) (221) (272) (122)
Increase in loans (49) (38) (38) (21) (1) 5 4
Dividends 0 0 0 0 0 0 0
Net equity raised/others 0 0 0 0 0 0 0
Net financing cashflow (49) (37) (37) (21) (1) 5 4
Incr/(decr) in net cash (9) 36 80 (53) (22) (2) 211
Exch rate movements 0 0 (1) - - - -
Opening cash 195 186 222 301 249 227 224
Closing cash 186 222 301 249 227 224 435
OCF PS (US¢) 0.2 1.5 2.0 1.3 2.0 2.7 3.3
FCF PS (US¢) 0.4 0.7 1.1 (0.4) (0.3) (0.1) 2.0

Growth (%)
Op cashflow growth (% YoY) (87.3) 727.1 35.3 (33.9) 53.7 32.4 24.3
FCF growth (% YoY) - 88.5 59.7 (132.0) - - -
Capex growth (%) (110.1) - 12.3 98.3 35.6 22.2 (54.5)
Capex/sales (%) 3.4 11.9 10.8 21.2 28.3 28.0 10.9
Capex/op cashflow (%) 113.4 51.4 42.6 127.7 112.7 104.0 38.1
Operating cashflow payout ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cashflow payout ratio (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free cashflow payout ratio (%) 0.0 0.0 0.0 - - - 0.0
DuPont analysis
Ebit margin (%) 3.8 (0.8) 11.9 13.1 23.0 34.6 39.1
Asset turnover (x) 0.3 0.3 0.4 0.4 0.4 0.4 0.4
Tax burden (x) 0.4 0.7 0.7 0.6 0.6 0.6 0.6
Return on assets (%) 0.4 (0.1) 3.1 3.0 4.4 7.8 9.4
Leverage (x) 1.2 1.2 1.2 1.2 1.1 1.1 1.1
ROE (%) 0.1 (0.8) 3.3 3.0 5.1 8.7 10.5
EVA® analysis
Ebit adj for tax 8 (3) 68 66 101 187 248
ROIC (%) 0.4 (0.2) 3.7 3.7 5.3 9.1 11.4
Cost of equity (%) 13.4 13.4 13.4 13.4 13.4 13.4 13.4
EVA/IC (%) (10.2) (11.0) (7.2) (7.1) (5.4) (1.7) 0.7
EVA (US$m) (200) (210) (130) (129) (103) (34) 14

Notes

Important disclosures Indonesia electric vehicles
Companies mentioned
Angkasa Pura (N-R)
Antam (ANTM IJ - RP2,250 - BUY)
Astra (ASII IJ - RP5,775 - O-PF)
Astra Agro (N-R)
Astra Daihatsu Motor (N-R)
Astra Honda Motor (N-R)
Astra Otoparts (N-R)
Astra Sedaya Finance (N-R)
Audi AG (N-R)
Australian Mines (N-R)
Australian Mines Ltd (N-R)
Badan Pengkajian dan Penerapan Teknologi (N-R)
BAIC International (N-R)
BAIC Motor (N-R)
Bank Central Asia (BBCA IJ - RP33,800 - O-PF)
Blue Bird (BIRD IJ - RP1,400 - BUY)
BMW (N-R)
Brunp (N-R)
Bukit Asam (PTBA IJ - RP2,760 - U-PF)
BYD - A (002594 CH - RMB173.80 - U-PF)
BYD (1211 HK - HK$187.10 - BUY)
CATL (300750 CH - RMB307.80 - O-PF)
Changan Ford Automobile Co Ltd (N-R)
Chengtun (N-R)
Chengtun Mining Group (N-R)
Chongqing Sokon Industry Group Co Ltd (N-R)
Clean TeQ (N-R)
Cleanteq (N-R)
CNGR (N-R)
CNGR Advanced Material Co Ltd (N-R)
Daihatsu (N-R)
Daimler (N-R)
Delong (N-R)
DFSK (N-R)
Dongfeng Auto (N-R)
Dongfeng Motor (N-R)
Dongfeng Sokon (N-R)
Federal International Finance (N-R)
First Quantum (N-R)
Ford Motor (N-R)
Freeport McMoRan (N-R)
Geely (N-R)
General Motors (N-R)
Gesits Technologies Indonesia (N-R)
Global Electric Motocars (N-R)
GoFleet (N-R)
Gogoro (N-R)
Gojek (N-R)
Gororo Inc (N-R)
Grab (N-R)
Grab Holdings (N-R)
Harita Group (N-R)

Highland Pacific (N-R)

Highlands Pacific Ltd (N-R)
Honda Motor (7267 JP - ¥3,345 - BUY)
Huayou Cobalt (N-R)
Hyundai Motor (005380 KS - ₩229,000 - BUY)
Inalum (N-R)
Indoritel (N-R)
Isuzu Motors (7202 JP - ¥1,132 - O-PF)
Jaguar Land Rover (N-R)
Jasa Marga (JSMR IJ - RP4,480 - BUY)
Jinchuan (N-R)
Jinchuan Group International Resources Co Ltd (N-R)
Jinlong (N-R)
Kia (000270 KS - ₩86,100 - BUY)
Kymco (N-R)
LG Chem (051910 KS - ₩805,000 - BUY)
Link Aja (N-R)
LinkAja (N-R)
LMIR Trust (N-R)
Mazda Motor (7261 JP - ¥908 - O-PF)
MCC - A (N-R)
MCC (N-R)
Mercedes Benz (N-R)
Merdeka (MDKA IJ - RP2,410 - O-PF)
Microsoft (N-R)
Mineral Resource Development Corporation (N-R)
Mineral Resources (N-R)
Mineral Resources Development Company Ltd (N-R)
Mining Industry Indonesia (N-R)
Mitsubishi Corp (N-R)
Morowali Huayue Nickel & Cobalt 1 (N-R)
Newmont Mining (N-R)
Ningbo Lygend (N-R)
NIO CHANGJIANG 1ST INVESTMENT LTD. (N-R)
Nissan Motor (7201 JP - ¥601 - O-PF)
Niu Technologies (N-R)
Niu TechnologiesAeonmotor (N-R)
Ola (N-R)
Oyika (N-R)
Panasonic (6752 JP - ¥1,395 - O-PF)
Perusahaan Listrik Negara (N-R)
Porsche (N-R)
PT Halmahera Persada Lygend (N-R)
PT Halmahera Persada Lygend 1 (N-R)
PT Halmahera Persada Lygend 2 (N-R)
PT Indomarco Prismatama (N-R)
PT Indonesia Asahan Aluminium (N-R)
PT Indonesia Puqing Recycling Technology (N-R)
PT Industri Baterai Indonesia (N-R)
PT Macika Mineral Industri (N-R)
PT Nasional Hijau Lestari (N-R)
PT Pegadaian (Persero) (N-R)
PT Pertamina (N-R)

PT Pos Indonesia (N-R)

PT QMB New Energy (N-R)
PT Transportasi Jakarta (N-R)
PT Tsingshan Steel Indonesia (N-R)
Quantumscape (N-R)
QuantumScape Corporation (N-R)
Ramu Nickel (N-R)
Renault (N-R)
SAIC (N-R)
Samsung SDI (006400 KS - ₩642,000 - BUY)
Sedaya Multi Investama (N-R)
Selis (N-R)
SK Innovation (096770 KS - ₩204,500 - BUY)
Sokon Automotive (N-R)
Sumber Alfaria (N-R)
Sumitomo (N-R)
Sumitomo MM (N-R)
Sunrise Nickel Cobalt Scandium Project (N-R)
Suzuki Motor (7269 JP - ¥4,680 - BUY)
Tata Motors (TTMT IB - RS308.9 - BUY)
Tesla (N-R)
Timah (N-R)
Toyota Astra Motor (N-R)
Toyota Motor (7203 JP - ¥8,362 - BUY)
Tsingshan Holding Group (N-R)
Uber Technologies (N-R)
United Tractors (UNTR IJ - RP21,875 - BUY)
Vale Indonesia (INCO IJ - RP4,500 - BUY)
Viar (N-R)
Vingroup (N-R)
Volkswagen (N-R)
Volkswagen China (N-R)
Volvo (N-R)
Volvo AB (N-R)
Wuling Motors (N-R)
Yamaha Motor (7272 JP - ¥2,693 - O-PF)
Yutong Bus (N-R)
Analyst certification
The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our
own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will
be directly or indirectly related to the specific recommendation or views contained in this research report.

Important disclosures
Recommendation history of Aneka Tambang (Persero) Tbk ANTM IJ
Norman Choong BUY O-PF
Stock price (Rp)
Other analysts U-PF SELL

No coverage N-R
4,000
3,000
2,000
1,000
May 18 Sep 18 Jan 19 May 19 Sep 19 Jan 20 May 20 Sep 20 Jan 21
Date Rec Target Date Rec Target

15 Jan 2021 BUY 4,000.00 02 Sep 2019 O-PF 1,250.00
20 Oct 2020 O-PF 1,200.00 20 Jun 2019 O-PF 900.00
17 Jul 2020 U-PF 670.00 30 Jan 2019 BUY 1,250.00
07 Jan 2020 O-PF 950.00 29 Jul 2018 BUY 1,100.00
Source: CLSA
Recommendation history of Vale Indonesia Tbk INCO IJ

Norman Choong BUY O-PF
Stock price (Rp)

No coverage N-R
8,000
6,000
4,000
2,000

15 Jan 2021 BUY 8,600.00 06 Aug 2019 U-PF 3,000.00
20 Oct 2020 BUY 5,000.00 24 May 2019 O-PF 3,000.00
12 Aug 2020 O-PF 4,000.00 30 Jan 2019 O-PF 4,100.00
17 Jul 2020 O-PF 3,800.00 04 Oct 2018 BUY 4,400.00
03 Apr 2020 BUY 2,700.00 29 Jul 2018 BUY 6,200.00
07 Jan 2020 BUY 4,500.00 23 Jun 2018 O-PF 4,800.00
02 Sep 2019 BUY 5,500.00
Source: CLSA

Recommendation history of Astra International Tbk ASII IJ

Sarina Lesmina, CFA BUY O-PF
Stock price (Rp)

No coverage N-R
9,000
8,000
7,000
6,000
5,000
4,000

30 Nov 2020 O-PF 6,100.00 02 Mar 2020 BUY 6,700.00
29 Jul 2020 SELL 4,500.00 05 Aug 2019 O-PF 7,780.00
10 Jun 2020 SELL 3,980.00 06 Mar 2019 O-PF 8,100.00
28 Apr 2020 U-PF 3,980.00 21 May 2018 BUY 9,000.00
Source: CLSA
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All Charged Up: Indonesia Electric Vehicles

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Indonesia electric vehicles

Sector outlook - Overweight

Sarina Lesmina, CFA

Vale Indonesia INCO IJ

Executive summary ......................................................................................................... 3

Investment thesis ............................................................................................................ 4

Laying out the EV strategies ........................................................................................ 10

Policies and subsidies analyses ................................................................................... 16

Development of EV battery value chain .................................................................... 38

How to play the theme ................................................................................................. 53

Vale Indonesia ................................................................................................................ 81

2 sarina.lesmina@clsa.com 23 March 2021

The government wants Government target for BEV 4-wheeler

23 March 2021 sarina.lesmina@clsa.com 3

Actions for emobility and EV value chain

Indonesia’s roadmap to build an EV ecosystem in two phases

Local production and technology enhancement (supply-side support)

Building up knowledge on battery-based electric vehicle (BEV)

Source: Government of Indonesia

Multi-channel policy support

4 sarina.lesmina@clsa.com 23 March 2021

A survey conducted by Japan’s Rakuten shows access to charging is the second

23 March 2021 sarina.lesmina@clsa.com 5

Gov’t target of 4W BEV sales EV charging station vs petrol station roadmap

Electricity capacity utilization rate Gov’t target of 2W BEV sales

Source: PLN Note: total 2W sales at 4% Cagr in 2024-2030.

Bluebird has started

Source: Company Source: PLN, CLSA

6 sarina.lesmina@clsa.com 23 March 2021

Meanwhile, the government has started planning a battery recycling programme

Unless the government or automakers provide more subsidies, EV cannot compete

Nevertheless, we expect EV ownership cost would reach an inflection point once

Source: Governments Source: Norwegian Road Federation (OFV)

Development of EV battery value chain

23 March 2021 sarina.lesmina@clsa.com 7

EV battery value chain and development status of manufacturing functions in Indonesia

Graphite Graphite Anode

Bauxite Aluminium Battery

The newly formed PT Industri Baterai Indonesia, a state-owned EV battery holding

Surplus/deficit of global refined nickel market Nickel demand from EV

Source: CLSA, Wood Mackenzie Source: CLSA

How to play the theme

8 sarina.lesmina@clsa.com 23 March 2021

Since Toyota has pledged to invest in local EV production, future made-in-Indonesia

Astra’s 4W sales by brand Low carbon emission vehicle (LCEV) 4W sales

Indonesian EV players valuation

23 March 2021 sarina.lesmina@clsa.com 9

Laying out the EV strategies

Indonesia’s electric vehicle roadmap

Local production and technology enhancement (supply-side support)

Building up knowledge on battery-based electric vehicle (BEV)

Source: Government of Indonesia

10 sarina.lesmina@clsa.com 23 March 2021

23 March 2021 sarina.lesmina@clsa.com 11

Current luxury tax (PPnBM) regime

12 sarina.lesmina@clsa.com 23 March 2021

Progressive local content Local content (TKDN) requirements for BEV

23 March 2021 sarina.lesmina@clsa.com 13