Indonesia-Japan Relations to Drive Electric Vehicle Market

Indonesia-Japan relations possess significant potential for propelling the growth of the electric vehicle (EV) market. These countries have joined forces in a strategic collaboration to expedite the widespread adoption of EVs.

In this article, we delve into the dynamic alliance between Indonesia and Japan, exploring the initiatives, investments, and policies that propel the EV market forward, ushering in a greener and more sustainable future for both nations and beyond.

Japanese car companies’ delay in adopting EVs

Japan’s auto industry remains hesitant to embrace electric vehicles (EVs). Japan currently dominates the market for gasoline-electric hybrids and wants to maximize its investment in this technology. However, this focus on hybrids risks leaving the country’s auto industry behind as the world transitions to EVs. 

Japanese automakers and regulators are skeptical of EVs’ profitability and environmental superiority in the short to medium term. Japan still considers hybrids a vital technology and does not plan to ban them like other countries. 

However, there are concerns that if they wait to move soon, they may lose out on the opportunity and suffer a similar fate as Japanese consumer electronics firms that failed to stay ahead of market trends.

A potential strong partner for EVs in the SEA market

Unlike Japan, Indonesia has fully embraced the shift to EVs and is set to become a major player in the industry. The country has unveiled a $17 billion road map to have 2.1 million electric motorcycles and 400,000 electric vehicles by 2025, with 20% manufactured locally. 

One of the key objectives is to have an all-electric bus fleet for Jakarta’s mass public transportation system within seven years, requiring 14,000 electric buses. 

The state-owned power company, PLN, has committed to installing over 31,000 additional EV charging stations by 2030 and has allocated $3.7 billion for investments in Indonesia’s EV sector. The government has also implemented various programs to enhance the capabilities of electric cars. 

Read more: The Investment Opportunity for an Electric Vehicle Ecosystem in Indonesia

Indonesia as an attractive partner for Japanese companies in the EV market

The following points highlight why Indonesia-Japan relations have become an appealing partnership potential in the electric vehicle (EV) market.

The partnership between Indonesia and Japan

To put a step forward in the right direction, Indonesia and Japan are engaged in discussions to develop EVs and carbon neutrality. The Ministry of Industry in Indonesia highlighted the establishment of dialogues with Japan to reduce emissions and promote EV development. 

Collaboration with Japan, known for its robust automotive industry, is seen as a means to support Indonesia’s efforts toward carbon neutrality. An Indonesia and Japan relations program has been initiated between the two countries to explore the electrification of vehicles and carbon-neutral fuels. 

Incentives for electric vehicles in Indonesia

The Indonesian government has introduced favorable policies regarding EVs to attract investors. The Positive Investment List includes the EV sector, offering benefits like business ownership and tax incentives. 

Companies investing over IDR 500 billion receive a 100% corporate income tax credit, while those investing between IDR 100-500 billion receive a 50% reduction. The government has consistently announced laws to expedite the growth of the EV sector, including the official EV roadmap. 

Additional measures have been introduced to support the development of the EV industry. These measures provide benefits like simplified business licenses and tax incentives, including a 0% luxury vehicle tax for zero-emission vehicles.

Read more: EV Battery Indonesia: Understanding the Opportunities and Challenges

Automotive collaborations between Indonesia and Japan

Business relations between Indonesia and Japan have been strengthening, with Japan committing approximately IDR 37 trillion to Indonesian manufacturing companies, particularly in the electric vehicle sector. The funds are reportedly from Toyota Motors and Mitsubishi Motors, two renowned Japanese automotive manufacturers.

Indonesia’s MRT project and its partnership with Japanese companies

The Jakarta Mass Rapid Transit (MRT) transportation system has emerged as the standout and flagship cooperation project between Japan and Indonesia. 

Japan’s Foreign Minister has expressed his satisfaction with the impressive progress of the Jakarta MRT, including surpassing passenger targets and its significant contribution to shaping the cultural landscape of Indonesian society. 

The presence of the Japanese authorities highlighted the significance and attention given to the cooperation between Japan and Indonesia in this flagship project.

The Jakarta MRT is a remarkable symbol of the successful partnership between Japan and Indonesia, showcasing their commitment to infrastructure development, technological advancements, and sustainable urban transportation solutions. 

It improves the mobility and convenience of Jakarta’s residents and serves as a model for other potential collaborative projects between the two nations.

Conclusion

Indonesia has been very progressive in approaching and embracing the shift to EVs. It has and will continue to provide many benefits to Indonesia, its people, and all its investors. 

Business entities should fully maximize their potential by investing in the EV industry in Indonesia. In doing so, businesses may find it helpful to rely on services provided by InCorp Indonesia (formerly Cekindo) for business licensing and company registration to ensure participation in this ever-growing market.