Indonesia seeks to rev up domestic EV production amid rising demand

JAKARTA: Indonesia is looking to expand domestic electric vehicle production and strengthen its battery supply chain as more motorists turn to electric cars and motorcycles to save on fuel and maintenance costs. 

The government is banking on the country's vast nickel reserves, growing consumer demand and policies aimed at encouraging local manufacturing to accelerate the shift towards electric mobility. 

But questions remain over whether Indonesia can sustain the momentum, with a long-awaited EV incentive scheme yet to be implemented and concerns emerging over whether subsidies would be better spent on improving public transportation. 

GROWING APPETITE FOR EVs 

For some EV owners, the appeal lies primarily in the lower cost of ownership. 

"In terms of cost, it's much cheaper. I don't need to worry about maintenance. The most I ever do is just check the brakes. It's highly efficient and charging it is also very cheap," said Lie, an EV owner in Jakarta. Like many Indonesians, he goes by one name. 

Another motorist, Taryon, pointed to the convenience of electric motorcycles, which are increasingly becoming a familiar sight on the capital's streets. 

"Compared to other types of motorcycles, electric bikes are more comfortable and easier to handle," he said. 

Electric motorcycles make up the largest segment of Indonesia's battery-powered EV sale this year, reflecting the country's heavy reliance on two-wheelers for daily commuting. 

While petrol and diesel vehicles continue to dominate Indonesia's roads, electric cars are also gaining ground. 

According to the Indonesian Automotive Manufacturers' Association, electrified vehicles accounted for 26.8 per cent of national passenger vehicle sales in the first half of 2026, up from 18.3 per cent during the same period last year. 

The figures reflect growing consumer interest in alternatives to conventional vehicles, although the broader electrified category also includes hybrid models that do not rely exclusively on battery power. 

Indonesia's large automotive market offers considerable room for further growth. 

Official data showed that the country had around 21 million registered passenger cars and more than 145 million motorcycles in 2025. 

A shift towards electric mobility could therefore translate into substantial demand for new vehicles, batteries, charging infrastructure and related services. 

BETTING ON DOMESTIC MANUFACTURING 

The growing demand is providing fresh impetus for Indonesia's ambitions to become a major regional hub for EV manufacturing. 

Authorities are seeking to expand local production capacity, with plans for factories capable of producing up to 100,000 electric cars and 100,000 electric motorcycles annually. 

Central to this strategy is Indonesia's position as the world's leading nickel producer, accounting for about two-thirds of global mined nickel output in 2025. 

Nickel is a key component in certain types of lithium-ion batteries used in EVs, giving Indonesia a potential advantage in developing an integrated supply chain that stretches from mineral processing to battery manufacturing and vehicle assembly. 

By building more of this supply chain domestically, the government hopes to attract investment, create jobs and capture greater economic value from its natural resources, rather than relying primarily on exports of raw materials. 

The push is also part of a broader effort to reduce dependence on imported fuel and strengthen Indonesia's energy security. 

In August, President Prabowo Subianto launched the National Electric Motorcycle Ecosystem, an initiative aimed at developing the country's electric motorcycle industry. 

The programme brings together government agencies, state-owned enterprises and private companies to strengthen various parts of the industry, including vehicle manufacturing, battery production, charging infrastructure and after-sales services. 

Prabowo warned that reliance on imported energy leaves the country vulnerable to disruptions caused by overseas conflicts and trade wars. 

Indonesia spends an estimated US$28 billion to US$30 billion annually on fuel imports, according to the president. 

"By using electric motorcycles, cars, buses and tractors, and by powering as many of our tools and devices as possible with electricity, we will be safer. We will be more prosperous," he said. 

ROADBLOCKS TO WIDER EV ADOPTION 

Despite the industry's growing momentum, uncertainty remains over a long-awaited government incentive scheme aimed at supporting EV adoption. 

Officials say discussions are ongoing, with the scheme still expected to take effect this year.  

However, the prospect of further subsidies has also prompted debate over Indonesia's transport priorities. 

Critics argue that encouraging more private vehicle purchases, even electric ones, would do little to ease chronic traffic congestion in major cities such as Jakarta. 

"We are already dealing with severe congestion, yet we are providing subsidies for the purchase of electric vehicles,” said Deddy Herlambang, executive director of Indonesia’s Institute for Transportation Studies. 

“These subsidies or incentives could instead be redirected toward public transportation.” 

Other barriers to wider adoption remain, including the need for reliable charging networks and accessible maintenance services. 

Vehicle prices, charging availability and concerns over long-term battery performance could also influence purchasing decisions, particularly outside major urban centres.