IESR

EXECUTIVE SUMMARY

Developing the Ecosystem of

Electric Vehicles in Indonesia
Lessons Learn from United States,
Norway, and China
2 Developing the Ecosystem of Electric Vehicles in Indonesia

Executive Summary

T
ransportation sector accounts for about a quarter of the total global GHG emissions. Emissions
from this sector are projected to continue to increase going forward in line with the increase
in mobility. Electric vehicles are a solution to reduce these emissions, when accompanied by
an energy transition in the electricity sector. In 2019, there were 7.2 million units of electric cars and
around 350 million units of electric two/three-wheelers, the majority of which were in China, the
United States and countries in Europe. These countries have successfully adopted electric vehicles by
implementing certain strategies and policies to build an electric vehicle ecosystem. This study aims
to provide strategy and policy recommendations for the Indonesian government to be able to build
an electric vehicle ecosystem from the lessons learned from the three comparison countries, namely
Norway, China and the United States. China and the United States are selected as these two countries
have the highest number of electric vehicle sales, while Norway is known to have the largest market
share of EV in the world.

In this study, the electric vehicle ecosystem is defined by taking into consideration of several aspects,
namely: (a) charging infrastructure; (b) electric vehicle model availability and supply; (c) public
awareness and acceptance; (d) the supply chain for battery and electric vehicle components; as well
as (e) incentives and supporting policies from the government. The strategies and policies adopted by
the three comparison countries are further analyzed in each aspect of the electric vehicle ecosystem.
Recommendations for the Indonesia’s government are compiled based on the comparative study of
the three countries and rectify with the situation and condition in Indonesia.

The above mentioned aspects of the electric vehicle ecosystem have not yet been developed in
Indonesia, thus hindering the adoption of electric vehicles. Data as of August 2020 revealed that there
were only 2,279 electric vehicles registered and deemed roadworthy. This adoption rate is still far
from reaching the target set by the Ministry of Industry in producing electric vehicles by at least 20%
of the total vehicle production in 2025 (400,000 LCEV four-wheeled vehicles and 1,760,000 electric
motors). Even though the government has issued Presidential Regulation Number 55 of 2019 as a
basis for accelerating the development of electric vehicles, its derivative policies are inadequate and
still unable to significantly increase the adoption of electric vehicles. Therefore, this comparative study
of the three different countries is essential to provide recommendations for Indonesia’s government
in achieving the aforementioned objective.

All three countries signify the important role of fiscal incentives to enhance the price competitiveness
of electric vehicles in fostering the adoption of electric vehicles. The Norwegian government provides
incentives, among others, in the form of VAT, registration taxes and toll fees exemptions that are
worth more than USD 12,600 per vehicle in total, or around 55% of the price of electric vehicles
themselves which make EVs cheaper than conventional vehicles. China has successfully led the global
EV market in 2015 due to government policies in providing subsidies and tax exemptions with a total
around USD 20,000 per vehicle. Similarly, one of the main reasons for electric vehicle consumers
in the United States to purchase the vehicle is due to the financial incentives given by the federal
and local governments in the form of tax credit and discounted purchase price which accounted to
approximately USD 14,000 per vehicle.

Non-fiscal incentives that match user needs have strongly motivated the consumers to switch to
electric vehicles. Local governments in several regions in China offer incentives to electric vehicles’
owners through providing the ease of obtaining registration plates which are considered to greatly
increase the attractiveness of electric vehicles. In several cities in Norway, providing bus lane access
has succeeded in increasing consumer interest in purchasing electric vehicles. Likewise in the United
States, the government implements an incentive program in the form of access to high-occupancy
vehicles areas in certain cities.
 Lessons Learn from United States, Norway, and China 3

The availability of electric vehicle supply and models is crucial to increase the sales of electric vehicles
in these three countries. Thus, it is important for the government to implement policies from the
supply side. California and several other States in the United States regulate a “Zero Emission Vehicle”
(ZEV) policy which requires vehicle manufacturers to produce a certain number of electric vehicles.
China implements a similar policy through a dual credit system. These policies create competition
among producers, encourage production, and attract more consumers thus increasing sales of the
electric vehicles.

China and the United States prioritize R&D to improve the technology and performance of electric
vehicles, including batteries. This is important because consumers are more attracted to the good
performance of electric vehicles. R&D is also used as a basis for industrial development in these
two countries. The existence of an electric vehicle industry offers a wide option of electric vehicle
models and subsequently reduces the price of EVs. Funds disbursed for this R&D program in each
country has reached more than USD 2 billion. Furthermore, governments in both countries distribute
a direct fund for battery manufacturers and/or electric vehicle manufacturers to accelerate industrial
development. Particularly in China, the government has prioritized the development of the domestic
EV industry in various ways such as financial incentives that only apply to local producers. This can
also protect the ownership of core technology and its intellectual property rights of the technology
owned by local producers. The Chinese government undertakes public procurement for local electric
vehicles to meet public transportation needs.

The construction and expansion of the charging infrastructure network is needed to support the
adoption of electric vehicles. Comparison in the three countries reveals that the availability of home
charging facilities is crucial for consumers to switch to electric vehicles. Moreover, a progressive
increase in the number of public charging stations each year determines the increase of EVs’ sales.
Governments in all three countries support the development of the public charging stations through
building up the infrastructure development and providing subsidies for private developers. The ratio
of electric vehicles to the charging station in 2019 in Norway and the United States was around 24:1
and 20:1, while China had the most massive charging station network with a ratio of 6.5:1. The ratio
represented the level of maturity of electric vehicle development among the three countries. A smaller
ratio was needed especially in the early stages of electric vehicle adoption.

This study recommends several policies that can be adopted by the government to develop electric
vehicle ecosystem in Indonesia:
• Align the national electric vehicle adoption targets and make it binding
• Develop an integrated roadmap for the transition to electric vehicles
• Appoint a coordination team and electric vehicle task forces at the national and regional levels to
guide the transition to be on track
• Implement policies to limit the sales of fossil fuel vehicles
• Provide financial incentives (from central government) to reduce the purchase price of electric
vehicles
• Provide fiscal and non-fiscal incentives (from local governments) in accordance with the conditions
of their respective regions
• Impose technology transfer in collaboration with international electric vehicle and battery
manufacturers
• Issue supply-side policies, like fuel economy standard, conventional vehicles quota and to
encourage production and increase availability of electric vehicle models
• Provide grants to research and academic institutions, as well as to EV and battery manufacturers
to support R&D of electric vehicles and batteries technologies
• Increase investment in domestic industrial and supply chain development of electric vehicles
• Develop a more massive public charging infrastructure network through mandate from
government entities along with the subsidies for private developers
• Electrify public transportation as an entry point for the adoption of electric vehicles
• Promote electric vehicles as environmentally friendly vehicles and educate consumers on the
benefits and incentives of purchasing EVs
 IESR
Institute for
Essential Services
Reform

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