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00:00 As many of you at home will know, Indonesia has committed to building a battery electric vehicle industry and ecosystem within its borders,
00:08 and has issued regulations and laws in support of this development.
00:13 Indeed, several manufacturers from around the world have signaled their commitment to help develop this industry right at home.
00:20 Now to talk more about what this industry might look like in the future,
00:24 we are now sitting down with Rahmat Aymuddin, the Deputy Coordinator for Infrastructure and Transportation of the Coordinating Ministry of Maritime and Investment Affairs.
00:34 Rahmat, thank you so much for taking the time to come sit down with us.
00:37 Pleasure, Pat.
00:38 First of all, I'm sure many viewers have already heard some background about Indonesia's plans to develop a battery electric vehicle industry,
00:48 but can you tell us the rationale that the government has behind developing such a vertically integrated electric vehicle industry in Indonesia?
00:57 Yeah, so basically there's multiple reasons to do it.
01:02 We can look at that from the environment point of view.
01:07 You know that today we are in climate crisis, and transportation is actually number two of the segment that actually emits CO2.
01:17 Right.
01:18 And then we also have seen that in Jakarta especially, the air quality is not that good,
01:26 and tailpipes emission is actually the main cause for air pollution.
01:33 So from an environmental point of view, shifting from combustion engine with tailpipe emission to EV is actually very important.
01:41 Also, you know that Indonesia imports petrol, actually.
01:50 So if we shift it to electric vehicle, basically this can support our energy security position.
01:58 And the other thing is that we also were quite aware that the current automotive industry is actually very important for Indonesia.
02:10 As everyone wants to shift at some point to EV, we do need to have the industry in the country.
02:19 Because otherwise, let's say, imagine if we don't have this industry at home,
02:24 and everybody wants EV, but we don't have the industry in Indonesia, then we'll actually become a consumer market.
02:32 Right. Now you've mentioned the industry itself, but it's not just about the production facilities or the production itself,
02:39 or the production of battery electric vehicles itself in Indonesia, is it?
02:42 Because you want to have a vertically integrated industry, all the way from raw nickel to the final product of electric vehicles to be sold.
02:53 Can you tell us about how this vertically integrated industry, this vertically integrated supply chain, I should say, would look like?
03:00 I think there are two sides, and maybe they will meet in the middle to become vertically integrated.
03:10 We discussed just now on the needs for Indonesia to have the local automotive manufacturing for BEV.
03:17 And then if you have the local manufacturing for BEV, then you can have a battery module, battery pack industry.
03:27 Because battery module and battery pack industry, they don't travel very well.
03:33 So you have to be nearby with the auto industry.
03:37 But if you look at further upstream, we speak a lot about hilirisasi or downstreaming of our critical mineral, including nickel.
03:51 What we want to do is to create a value-added for our nickel ore.
03:57 Do we need to process everything into becoming like a car?
04:03 I guess the answer is no.
04:05 Because Indonesia actually has maybe about a quarter of nickel reserve in the world.
04:12 But today, Indonesia maybe only has about 2% of the world's car production.
04:19 So I don't think we want to make sure that all the nickels, if you want Indonesian nickel, you have to buy it in the shape of a car.
04:27 That is not the case.
04:29 But we need to create a car industry, we need to have a nickel industry as far down the value chain or downstreaming as possible.
04:39 But let's move on to the manufacturing side of the supply chain.
04:42 Because last year, as we know, the president issued a ProPres No. 79 of the year 2023, which was specifically worded such that manufacturers do not need to build factories here, but only that their cars are produced here.
04:55 So we already know some companies that are producing cars here.
04:58 We have producing electric vehicles, I should say here.
05:00 We have Hyundai and we have Wuling that produce pure EVs in Indonesia.
05:04 While BYD and Vinfast have also shown their commitment to producing their vehicles here as well.
05:12 Can you tell us how much capital has been invested by these companies in total?
05:16 And perhaps how many jobs they can create and they have created so far?
05:21 The presidential regulation is relatively new and today, basically only last month that we have finalized all the implementing regulations.
05:35 I think Hyundai and Stellantis are currently in the process of applying for this program.
05:43 But that being said, some of these companies that are already here mostly have improved their production capacity.
05:54 I think Hyundai initially, maybe when they started in 2022, produced maybe about 3,000.
06:02 Maybe you remember people have to wait like two years for an Ioniq 5.
06:07 I remember that, yeah.
06:08 And then now maybe you can buy it right now, you can walk in.
06:11 Because their production capacity has increased.
06:14 Wuling and the group initially only have one model, which is Wuling R.E.V.
06:21 And today they have launched at least three additional.
06:25 One is Bingo and then MG, like two MG models.
06:31 So you start seeing that more and more cars are being produced in Indonesia.
06:37 There's another company that you just mentioned also, which is Chery, Chery Omoda, and there's a few more.
06:43 So in terms of production capacities, as they produce in Indonesia, obviously they will employ people.
06:49 And the reason why we mentioned that you don't have to create factories, but as long as you produce in Indonesia,
07:00 of course, if you don't have factories and you want to create one, we are very, very welcome.
07:06 But we also want to accommodate existing producers who want to ship from ICE to EV.
07:14 For example, Hyundai and I think Wuling are examples of that.
07:18 So they used to have like, you know, 100% ICE and they dedicated some of their production capacity for EV.
07:28 So we would like to be able to support those companies as well.
07:32 Now it's interesting you mentioned that because Stellantis, as you mentioned earlier,
07:36 is actually, from what I've read, having to open their production line here as well, aren't they?
07:42 Can you tell us perhaps some other EV manufacturers or ICE vehicle manufacturers
07:49 that you would like to convert to EV manufacturing and production in Indonesia that you have been pursuing to produce in Indonesia as well?
07:58 Yeah, so I think, you know, at least the two companies, like the three companies that I mentioned,
08:05 Hyundai, Wuling, and Sherry are all ICE manufacturing companies that now have EV lines.
08:15 The ones that we are currently speaking with, discussing, is also the Japanese manufacturers.
08:23 I think right now they do have some EV products.
08:27 If I'm not mistaken, Mitsubishi have issued, like, you know, they call it the Mini Expander or AKEX or something like that.
08:38 I forgot what is the tech name, but they have put it in the in the in GIAS and AMS a couple of times already.
08:45 So I'm waiting for them to launch it in Indonesia.
08:49 And as well as others, I know Toyota actually have an EV product.
08:56 It's just now, right now, they do CB.
08:59 So Honda and everyone, but basically we are any manufacturers who wants to produce EV,
09:08 we are actually ready with our incentive program, both for the manufacturers and also for the customers.
09:16 Okay.
09:18 Let's talk about some of these manufacturers and perhaps some of the trends that we've seen in EV manufacturers.
09:24 Because recently there has been developments in battery technologies that do not use nickel.
09:31 For example, some versions of solid state batteries, as well as LFPs.
09:36 So how will the Indonesian government respond to this?
09:38 Will they still take them in with open arms, if you will?
09:43 Or will there be some other regulations about that as well?
09:46 Well, today, I think for the new EV, the goal for us is to reduce our dependency to fossil fuel.
09:57 So any type of technologies actually we welcome, as long as they comply with local content requirements.
10:03 And at some point, that means that they have to produce the battery domestically.
10:08 If they use nickel, then they will get the benefit of our supply chain.
10:14 Of course. But if they want to use other technologies, we are welcome.
10:20 It just so happened that we know that nickel actually has certain characteristics,
10:27 and LFP also has different characteristics.
10:30 So LFP typically has less energy density than nickel.
10:36 So it's probably heavier, takes more time to charge.
10:42 And they also have certain characteristics that maybe they are not that good in extreme temperatures,
10:49 like in snowy countries.
10:51 In Indonesia, we actually have stable temperature.
10:54 So I think it's okay for Indonesian people to use LFP.
11:01 Typically, LFP is used for cars with lower performance.
11:07 And in Indonesia, we want to focus on affordability.
11:10 So I think it's fine. But we are also not worried about the need for our nickel.
11:15 Because I mentioned Indonesia actually has 2% of the car market.
11:20 Two-thirds of the car markets in the world are actually in three regions.
11:24 One-third in China, one-sixth in North America, and one-sixth in Europe.
11:30 And these three regions actually have winter.
11:34 And typically, they also have higher purchasing power.
11:38 So essentially, they probably want higher performance battery.
11:41 And typically, with the current mature technology, it's actually provided by nickel-based.
11:46 So really, it's all about the manufacturer's choice, isn't it?
11:49 If they want to use nickel, then they can.
11:52 If they don't want to, then they don't have to, for sure.
11:54 But what's for sure as well is that for them to be able to gain the incentives,
11:58 the incentives, of course, obviously only provided to companies whose products follow certain conditions,
12:04 i.e. being assembled in Indonesia, being one of the conditions.
12:09 But can you explain to us what these conditions actually are and why these conditions were set?
12:15 Yeah, because the goal is for us to have the ecosystem in the country.
12:22 Because we want to be able to make sure that later on, our automotive industry,
12:29 even in the era of BEV, we actually have it domestically.
12:35 So what we put is if you were to get all these incentives, you have to follow certain conditions.
12:43 So initially, we created that it has to follow the local content requirement roadmap,
12:50 which is 40% by a certain time, I think until 2026.
12:56 And then 2027, it becomes 60%.
12:59 And then by 2030, it becomes 80%.
13:02 40%, what does it take?
13:05 What do you need is actually to assemble here, and also you have to use some local,
13:14 what do you call it, spare parts, local things in Indonesia, or you do R&D.
13:23 So R&D is about, you need to spend about, before take 16 million euros over,
13:29 16 million dollars over five years, about 50 billion rupiah for five years.
13:35 So 250 billion in total.
13:38 That is not that big, but it's actually quite significant to push for more investment.
13:43 But the moment you go to 60%, you need to have some sort of battery manufacturing.
13:48 At least battery module pack, right?
13:51 And then by 80%, then the cell has to be built in Indonesia.
13:56 I think that is what is required.
13:59 Of course, in the PairPress '79 and other permanent invest,
14:05 we introduced this new program that is designed to attract manufacturers
14:16 who actually start from zero.
14:19 So what we say is, you can import first.
14:23 Until end of 2025, you can import.
14:26 Because we know that initially maybe you need time to build your market,
14:33 as well as build your capacity or factory.
14:37 And then what you can import, we will waive some of this import duty and luxury tax.
14:44 As long as you fulfill certain requirements,
14:47 which means that you have to promise to produce the same amount of what you import by 2027.
14:54 And you have to provide bank guarantee to guarantee that you actually do that.
14:59 Well, it's going to be very interesting to see how this industry will develop into the future.
15:03 Barahmat, thank you so much for your time and doing this interview with us.
15:07 I see you today.
15:09 Thank you.
15:10 [Music]