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Major Roadblocks In Motorbike Electrification In Indonesia

Indoensia to get 13M electric 2-wheelers on roads by 2030. At present, Indonesia has only 5,500 on road with many tough decisions to consider to meet nation’s goal.

Major Roadblocks In Motorbike Electrification In Indonesia

Depleting fossil fuel and concern for the environment has made nations around the world strongly promote electric vehicles. Indonesia, like many other nations, is committed to the Paris Agreement to become Carbon Neutral by 2060.

To become a carbon-neutral nation by 2060, the country has targeted to get 13 million E2W (electric two-wheelers) on its roads by 2030. At present, the number of units on Indonesian streets is 5,500. That makes the target a very far way away, even without considering the many tough decisions the country needs to take to reach this goal.

Electrum, an e-motorbike manufacturer, has plans to capture this segment in the streets of Indonesia. The company is a joint venture between Gojek (a giant ride-hailing company) and TBZ Energi (one of the largest energy companies in Indonesia). Electrum has plans to manufacture electric two-wheelers (E2W), provide financing as well as develop charging infrastructure for it.

As per the initial evaluation, owning an E2W in Indonesia is cheaper than any other motorbike. The calculations done by the Institute for Essential Service Reforms (IESR) say owning an E2W for 6 years will cost its owner a total of IDR 24.8 million or USD 1,728, whereas a combustion engine motorbike will cost them IDR 26.5 million or USD 1,846.

So even though the price of an E2W is more, its maintenance and fuel efficiency balances the cost over time. However, the same does not hold true for an electric four-wheeler (E4W) because of its much higher purchase price.

Indonesia has the potential to drop the price of its EVs by domestically manufacturing its ecosystem. The batteries, which are the most expensive part of an EV, need Nickel for its production, which Indonesia has in abundance along with other key components like Bauxite and Magnesium ore.

The country has already inaugurated its first battery production unit through the state-owned Indonesian Battery Corporation (IBC), which is tasked to build a domestic supply chain for batteries.

The problem is that despite all of this, the country woke up very late to this opportunity. Where Indonesia has only managed to bring 5,486 E2W on the road till 2021, its neighbour India has crossed 1 million of E2W sales, and China is already producing 34 million E2W vehicles per annum.

Indonesia needs an exponential growth of its E2W ecosystem to reach its 15 million E2W targets by 2030, and for that, it needs to make some tough calls on the four main parameters:

Is The Target Realistic?

E2W will play just a small part of the country’s commitment to reach carbon neutrality by 2060, and even with that, the Indonesian ministries do not have any road map to reach its goal of 13 million licensed E2Ws by 2030. The projection says that the country can produce only 2.45 million units of E2W by 2030.

This big gap means that the country will have to depend heavily on imports which will be at odds with the country’s aim to develop local manufacturing capacities. To make matters worse, the 13 million targets E2W’sE2W’s are way below the requirement to reach Indonesia’sIndonesia’s goal in 2060.

As per the think tank, ISER, the country will need 110 million E2W and E3W by 2030 to be able to meet its full decarbonisation goal. The gap between 13 million and 110 million is humongous.

Battery Infrastructure To Adopt?

The Indonesian government will have to make some vital decisions with regard to the charging concept of EV adoption. Whether it will be a Plug-in charging or a battery swapping charging system?

Some of the country’s early E2W manufacturers have built bikes with plug-in charging at home, which works but does limit the mobility of the biker because recharging takes time and planning.

On the other hand, swapping is much more convenient as it can be done in a few seconds. But even this method has a whole set of problems. Like battery swapping needs standardization.

Standardising the batteries and scaling up the battery swapping infrastructure seems like the only solution to this problem. Or else each brand will need its own charging facilities, which is hugely inefficient.

There are many fundamental questions that arise in front of the government in this regard, and none of them have any easy answer. 

Local Industry Development Or Imports?

To bring the cost of EWs down, the country will need to build domestic manufacturing of its batteries. However, by IERS, it will take at least 2025 for local manufacturing to be able to provide domestic batteries on a large scale.

So, till that time, the country will be dependent on imported batteries and to make the adoption of E2W vehicles easier, Indonesia will have to lower its import duties and regulations. But now, the question that arises is, if the imported batteries are cheaper, there is no incentive to grow in front of the domestic manufacturers.

So the question for the government is whether to let the industry develop by letting everyone in or risk the slow down of the E2W transition by restricting imports and favouring local manufacturers.

How To Boost The Demand?

It is clear that the E2W vehicles will give better efficiency to the owners, but a large-scale shift in demand to a new technology requires additional incentives as well as education campaigns.

One way to do that is through the government banning vehicles with combustion engines from 2040 and phasing out fuel subsidies. The move will, however, be both unpopular as well as politically risky.

However, aggressive and robust policies are the only way to accelerate the adoption of electric vehicles. The country will need to give incentives to its consumers to increase the attractiveness of the new technology as well as introduce unpopular disincentives like taxes and fines on combustion engines if it has to meet its target in carbon neutralisation.

The country does not have any definite answers to the many problems that the E2W adoption brings, which has made its growth really sluggish.

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