Indonesia EV Battery Industry Roadmap

Indonesia has committed to bringing electricity to its people. With an increasing electrification ratio, the country continues to connect millions of households and individuals to electricity. One of its strategies to support and realize Indonesia’s electrification is producing and utilizing electric vehicles (EVs).

According to the Electric Vehicle Production roadmap drawn by the Indonesian Government in July 2021, Indonesia ambitiously plans to produce 400,000 EVs by 2025, 600,000 EVs by 2030, and 1,000,000 EVs by 2035.

The Indonesian EV sector is still relatively underdeveloped. Approximately only 15,000 EVs were sold in 2019, which is a mere 0.2% of the annual vehicle sales for that year. However, firms by McKinsey have predicted a significant increase in the number of EV sales over the coming years.

Opportunities in Developing Indonesia’s EV Battery Industry

The COVID-19 pandemic undoubtedly has a significant impact on the automotive industry. To bolster this, the Indonesian government began relaxing taxes on luxury goods.

This is done to regenerate demand in the industry. The attempt is evidently a successful one as, since the introduction of such a measure in March 2021, the volume of vehicle sales and production has gradually increased.

The battery market in Indonesia is expected to grow exponentially from 2020 through 2025. Indonesia’s attempt to reduce CO2 emissions by 2030 opens room for EVs to be utilized at a larger scale. The growth and usage of EVs are expected to be the driving force of Indonesia’s battery market, with a projected increase in the demand for lithium-ion batteries.

A lithium-ion battery is a rechargeable battery type with high energy density levels and high safety levels. This type of battery is most commonly utilized for portable electronic devices and EVs. Indonesia has extensive nickel and cobalt reserves, both primary raw materials for Lithium-ion batteries.

Indonesia’s large deposits of raw materials are most likely to further fuel the growth of the battery market in Indonesia. The Indonesian battery market is also an attractive one as Indonesia provides access to production facilities, competitive labor prices, and a large domestic market, making it ideal for battery manufacture.

The Indonesian government is optimistic about the large-scale adoption and development of EVs, which are expected to be used as a mode of public transportation. Aside from that, the development of e-cars is also directed at tourist areas, industries, and offices.

As of now, EV has not gained significant traction in Indonesia as there is an overwhelming dependency on fossil fuels as the main alternative for transportation sectors. The potential growth of EVs is also primarily based on the dire need for Indonesia to transition away from the usage of fuel-based vehicles as they continue to impact the environment adversely. Businesses seeking to exploit the potential growth of this industry can obtain assistance on matters regarding company registration and also market research and analysis through InCorp Indonesia.

The Lingering Challenges

Despite there being a significant potential for growth in the battery industry in Indonesia, the initial investment required to establish a battery manufacturing industry is still a sizable one.

Another challenge that stakeholders may also face is the lack of standardization in the EV sector. Each battery type requires a different charger and treatment due to differences in electric current and power.

EV battery supply chains also are often faced with increased costs and environmental concerns that are associated with the extraction process of the raw materials. The pandemic has also added to the challenge as it has created a cloud of uncertainty over the sustainability of the market and supply chain conditions.

Strategic Moves to Develop Indonesia’s EV Battery Industry

Developing the EV sector would require all the relevant stakeholders to make significant contributions. The Indonesian government has shown its intent and commitment to this sector by issuing a national policy relating to the acceleration of the EV implementation.

Aside from this, various ministries, including the Ministry of Finance, Ministry of Energy and Mineral Resources, Ministry of Home Affairs, and Ministry of Communication and Information Technology, have taken active roles in easing the development by eradicating various taxes for the same.

These include tariffs on luxury goods for the automotive industry integrated with batteries, incentivizing facilities for charging equipment, and even providing connectivity facilities through internet-based applications. The State Electricity Company, or Perusahaan Listrik Negara, also plans to deliver incentive facilities for EV consumers.

Private parties and entities also show their commitment by accelerating investments in the electrification process of Indonesia. The Indonesian Battery Corporation in March 2021 is a newly formed State-Owned Enterprise that manages the integrated EV battery industry from upstream and downstream investment.

Aside from this, Regional Owned Enterprises are also extending support to local governments to utilize EVs as operational vehicles within the scope of their respective regions.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

Lead Form

Disclaimer: The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind.

We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials.

We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

Frequent Asked Questions

By using a market research and analysis service, you will be provided with an in-depth analysis of the economic potential in each Indonesian territory, such as the government regulations for specific market sectors, suitable products for specific markets, and others.

Indonesia’s agricultural sector, known for its abundant commodities like rubber, palm oil, cocoa, tea, and cloves, plays a crucial role in its economy. Despite the challenges posed by the Covid-19 pandemic, agriculture has demonstrated resilience.

Agriculture technology or agritech in Indonesia has contributed significantly to GDP growth. However, the sector is facing hurdles due to urbanization. It results in declining employment opportunities. 

To address these issues and unlock the sector’s potential, foreign investors can play a pivotal role. 

Benefits from agritech development in Indonesia

To make it accessible, the agriculture sector has now evolved into agritech in Indonesia. Therefore, many investors are making good bets in agritech. The focus is bridging the gap between farmers and markets, improving access to capital, and advancing technological skills. 

This article explores the opportunities and challenges of investing in Indonesia’s agriculture sector and highlights how foreign investors can contribute to its rejuvenation.

1. Bridging farmers to the market

Transporting agricultural commodities and directly reaching end-consumers is a significant challenge in Indonesia’s archipelago landscape. The complex trade channels, characterized by numerous intermediaries, lead to inefficiencies, with farmers receiving minimal returns while consumers pay exorbitant prices. 

Agritech companies like TaniHub and SayurBox are addressing this issue by leveraging smartphone applications to connect producers with end customers. These platforms eliminate middlemen, enabling farmers to earn higher profits while offering more affordable prices to consumers. 

TaniHub and SayurBox focus on the B2C market, while Panen ID and Chilibeli’s Chilimart cater to the B2B sector, facilitating direct trading with hotels and restaurants.

2. Improving access to capital

Farmers often need help to secure low-interest loans from banks due to the lack of collateral and cumbersome administrative processes. Agrotech companies are integrating financial solutions into their platforms to overcome this challenge. 

TaniHub, for instance, has launched TaniFund, a peer-to-peer lending fintech that allows users to lend money to farmers and earn reasonable returns. Additionally, several other firms in this field, such as Crowde, iGrow, and TaniJoy, provide financial inclusion and support to farmers.

3. Advancing technological skill

Technological advancements, particularly the Internet of Things (IoT), have opened new possibilities in farming. Farmers can now automate and standardize processes with IoT devices. 

For example, HabibiGrow, a product by Habibi Garden, enables remote and autonomous watering of plants and greenhouse regulations. Companies like MSMB have developed tools like drone sprayers, surveillance systems, and soil and weather sensors. 

These technologies empower farmers to enhance productivity and efficiency.

Challenges in Indonesian agritech

Despite the achievements of pioneers of agritech in Indonesia, the sector still faces challenges in Indonesia. The following vital challenges impact farmers:

1. Lack of digital literacy 

Farmers often need more exposure to modern technologies as traditional agricultural practices prevail. Widespread adoption of agrotech solutions requires educating farmers about these opportunities.

2. Insufficient financial inclusion 

Formal financial institutions hesitate to lend to farmers, especially those without real estate assets, due to perceived high risks. With adequate liquidity, farmers may be able to purchase agritech technologies or invest time in learning their usage, hindering their adoption.

Government initiatives and opportunities

Recognizing the potential of agritech startups, the Indonesian government has launched initiatives to encourage collaboration between conventional players and digital agritech platforms. The Ministry of Information Technology’s “Farmers and Fishermen Go Online” campaign aims to enroll one million farmers and fishermen in digital programs. 

Additionally, venture capital firms, traditionally focused on high-growth consumer startups, are now exploring agritech investment prospects in Indonesia.

Establish your agritech company with InCorp Indonesia

If you are considering investing in Indonesia’s agritech sector, InCorp Indonesia offers seamless company registration services, ensuring a smooth entry into the market. Our expert consultants can assist you in acquiring the necessary business licenses efficiently. 

Moreover, Cekindo provides comprehensive market research and due diligence services to help you make informed investment decisions. Additionally, our tax and accounting services and HR and recruitment support can help reduce the overhead costs of setting up a dedicated department. 

Partner with InCorp Indonesia to unlock the full potential of your agritech investment in Indonesia.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

Lead Form

Disclaimer: The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind.

We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials.

We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

Frequent Asked Questions

By using a market research and analysis service, you will be provided with an in-depth analysis of the economic potential in each Indonesian territory, such as the government regulations for specific market sectors, suitable products for specific markets, and others.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Indonesia has the world’s fourth-largest population and expected will have the world’s fourth-largest economy by 2050. Hence, the rise in demand for energy looks inevitable which would further open up new possibilities for renewable energy companies.

To ensure judicious use of renewable energy resources, the Indonesian government has set aggressive targets. The National Energy Policy (KEN) and Plan (RUEN) target that renewable energy resources provide 23% of all final energy consumption, whereas the draft National Electricity Plan (RUKN) aims 25% renewable electricity for the power sector, by 2025.

These targets also satisfy the country’s greenhouse gas emissions goals while increasing national energy security at the same time.

Moreover, the Indonesian government is working on a proposal to export up to 300 megawatts (MW) of power to Southeast Asia via a 400 kilovolt (kV) underwater transmission system. According to reports, the power to be exported will be created using innovative and renewable energy sources (EBT). The idea came about when the government proposed the creation of a 2.2-gigawatt peak (GWp) floating solar power plant (PLTS) in Duriangkang Reservoir, Batam, Riau Islands.

Hence, the development of Indonesia’s renewable energy sector will generate medium- to long-term opportunities for foreign investors as the government shifts its focus to renewable energy.

Understanding Market Landscape of Indonesia Renewable Energy Sector

Based on Indonesia’s electricity supplier – PLN’s Electricity Supply Business Plan (RUPTL) and current market circumstances, the overall market for renewable energy is expected to reach USD 38.9 billion by 2025.

The following has been divided depending on the size of the market for each type and category of renewable energy, as well as the potential share for foreign enterprises.

Geothermal

Indonesia Renewable Energy - Geothermal IconThe market for geothermal energy is expected to be around USD 21 billion. With a number of new projects coming online and new concession areas issued, Indonesia became the world’s second-largest geothermal power producer in 2018. Geothermal exploration is regarded as a high-risk, high-capital endeavor. National state-owned companies have been given the majority of new geothermal concessions, although many lack the resources and competence to properly develop the projects.

Hydropower

Indonesia Renewable Energy - Hydropower_icon

The hydropower market is predicted to be worth USD 12.9 billion, with medium and large hydropower (> 10 MW) accounting for USD 9.5 billion and small hydropower (< 10 MW) accounting for USD 3.4 billion. With a few exceptions, the government prefers to establish PLN rather than IPPs for most medium and large hydropower projects. These initiatives have the added benefit of being able to attract foreign investment in Indonesia.

Bioenergy

Indonesia renewable energy - bioenergy_icon

The market for bioenergy is expected to be worth USD 2.5 billion. This includes USD 650 million for biomass, USD 200 million for biogas, USD 1.5 billion for waste-to-energy, and USD 166 million for biodiesel producers. While there are presently no waste-to-energy projects in Indonesia, with the release of a Presidential decree encompassing 12 of the country’s major cities and a smooth procurement procedure in place, the sector is projected to accelerate.

Solar Energy

indonesia renewable energy - solar panel_icon

The solar photovoltaics (PV) market is expected to reach USD 769.3 million, with utility-scale PV accounting for USD 675.5 million and rooftop PV accounting for USD 93.8 million. Smaller solar PV systems (250 kW to 5 MW) on small island isolated grids now supported only by diesel generators are being promoted by the government and PLN in addition to bigger grid-linked solar PV projects. The bigger utility-scale projects are being developed by foreign investors. The majority of the equipment opportunities in the market for both utility-scale and rooftop solar PV are accounted for by imports of solar PV panels and inverters.

Smart Grid Solutions

Indonesia renewable energy - power grid_icon

The smart grid solutions market is estimated to open between 2020 and 2025. Currently, improved micro-grids and battery energy storage systems (BESS) are in the pilot demonstration stage. It is estimated that these markets will reach USD 153 million and USD 280.5 million, respectively, based on MEMR’s focus on enhancing grid operability and PLN’s realization of the importance of smart transmission and distribution system control and BESS.

Government Supports Foreign Investment in Indonesia Renewable Energy Sector

Relaxed Regulations

Following the passing of the Positive Investment List, the Indonesian government opened up certain formerly closed-off corporate sectors to foreign investment, particularly those in the energy industry, such as:

KBLI Sector Requirements Foreign Ownership
35101 Power Generator Investment value must be under IDR 100 billion 100% foreign ownership
35101A Renewable Energy Power Plant None 100% foreign ownership

Incentives

Indonesia’s Renewable Energy Power Plant Business Activities (KBLI 35101 A) has also been designated by the government as a pioneer industry eligible for tax breaks.

For newly established investments with a minimum value of IDR 100 million, the Corporate Income Tax (CIT) due will be waived for the first 5 to 20 years after commercial production begins, followed by a 50% CIT decrease for the next two years.

Furthermore, the Ministry of Finance provides Indonesia tax holiday of 50% of CIT payable for 5 years, followed by a 25% CIT reduction for the next two years, based on a capital investment plan of IDR 100 to 500 billion.

How Can Cekindo Help?

While making an investment in Indonesia renewable energy sector, Cekindo will provide you with a seamless company registration experience. Our consultants can further assist you with the acquisition of business licenses with the least delay.

Moreover, if you want to analyze sectors and know more than what the stats say before investing in Indonesia, Cekindo’s market research and due diligence team can assist you to review your possible investments. Furthermore, Cekindo provides tax and accounting services and can act as your HR entity to carry out HR and recruitment services to help cut overhead costs of setting up a department.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

Lead Form

Disclaimer: The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind.

We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials.

We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

Frequent Asked Questions

By using a market research and analysis service, you will be provided with an in-depth analysis of the economic potential in each Indonesian territory, such as the government regulations for specific market sectors, suitable products for specific markets, and others.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

Indonesia is currently developing a plan to relocate its capital from Jakarta to a new city in East Kalimantan, Borneo. Part of the reason for the relocation is to ease traffic congestion in Jakarta, which has made the city polluted, and overcrowded. Indonesia’s new capital city would also symbolically centralize the administration, which is perceived to be excessively Java-centric.

The administration handed over the draft law on the new capital to the House of Representatives, along with the presidential letter to confirm it, signaling the start of the parliamentary discussion process on the nation’s new capital city.

The project is expected to cost a lot of money: the government expects state-owned enterprises and the private sector to cover 80% of the expenditures, with the government covering the remainder.

The development will present ample opportunities for foreign investors in a region that has historically lacked investment. In this article, we’ll discuss multifaceted aspects of opportunities and challenges in Indonesia’s new capital city development.

Indonesia’s New Capital City: Opportunities and Challenges for Foreign Investors

Developing Indonesia’s New Capital City – Potential Sectors to Invest

Infrastructure

Companies involved in soft and hard infrastructure, such as urban development, utilities, toll manufacturing, environmental consultancy, and those in the business of creating smart cities, will benefit from such a project.

For instance, investing in Indonesia’s marine infrastructures, such as building ports, in East Kalimantan, may boost industrial productivity in the country’s eastern areas, which account for 64% of the country’s total land area.

Trade

Given the country’s location on one of the world’s busiest waterways, the government launched the sea toll initiative in 2015, intending to develop 41 new ports around the country, including Maluku and Papua in the country’s east, to possibly establish new economic centers and shipping routes.

This would also benefit East Kalimantan province, which is known for its wealth of commodities ranging from coal to gold to oil (which accounts for roughly 80% of its exports) and can assist the province in exploring new export markets.

Energy

While fossil fuel-fired power stations currently account for the majority of electricity generation in East Kalimantan, the president wants the future capital to rely on renewable energy. For international investors interested in solar energy, hydropower dams, wind farms, and biomass generators, this provides a significant opportunity.

There is also the possibility of creating a large-scale electricity storage system that might channel power from the adjacent province of North Kalimantan, where the government is currently building a hydroelectric dam.

Tourism

East Kalimantan’s tourism industry will benefit from improved infrastructure, which will lessen its reliance on mining commodities. More than 500 tourism attractions have already been created in the province, with more natural reserves and tropical forests being safeguarded and preserved. International hotel brands and high-end luxury resorts will leverage great opportunities in the area.

Developing Indonesia’s New Capital City – The Challenges

The government wants to largely depend on public-private partnerships (PPPs), with current estimates indicating that the Indonesian government will only cover 10-20% of the entire cost of the new capital. This means that the rest of the expense, as well as project risks, will be borne by the private sector.

The fact that Indonesia’s bureaucratic environment remains complicated, with a gap between local and national governments, might stymie private investment. However, the government has made some significant moves in 2021 to remove infrastructure investment limitations.

This is evident in Indonesia’s Operational Risk Index score of 53.9 out of 100 for Investment Openness, which is low relative to Jokowi’s administration’s objectives and lags behind regional competitors such as Malaysia, Thailand, and Hong Kong.

Indonesia ranks 12th in East and South East Asia for Legal Risk, behind economies such as Vietnam, Malaysia, and Taiwan, with a score of 47.2 out of 100. As a result, legal concerns and possibly time-consuming anti-corruption and due diligence inspections are likely to prevent the government’s desire to depend on PPPs.

Aside from the pledge to construct new government buildings by 2024, there has been little information regarding the precise details of projects directly related to the development of the new city.

How Can Cekindo Help?

While making an investment in Indonesia’s new capital city, Cekindo will provide you with a seamless company registration experience. Our consultants can further assist you with the acquisition of business licenses with the least delay.

Moreover, if you want to analyze sectors and know more than what the stats say before investing in Indonesia, Cekindo’s market research and due diligence team can assist you to review your possible investments. Furthermore, Cekindo provides tax and accounting services and can act as your HR entity to carry out HR and recruitment services to help cut overhead costs of setting up a department.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

Lead Form

Disclaimer: The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind.

We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials.

We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

Frequent Asked Questions

By using a market research and analysis service, you will be provided with an in-depth analysis of the economic potential in each Indonesian territory, such as the government regulations for specific market sectors, suitable products for specific markets, and others.

It depends on the type of company you decide to establish.
  • In a local (PT) company, a foreigner cannot become a commissioner. It is possible to have a foreign director, but there has to be at least one local Director in PT.
  • In a foreign-owned (PT PMA) company, a foreigner can be a director or a commissioner.

Foreign citizens can expand to Indonesia and establish a foreign-owned company (PT PMA). Depending on the business line you want to pursue, there are regulations for foreigners to follow when setting up a company in Indonesia. One of the most important is the so-called Positive Investment List, which is updated frequently and with other Indonesian regulations.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.