Ammaar Abdur Rasyid

21020122140137
English Class – A2
Article title: BUILDING INDONESIA’ ELECTRIC CAR ECOSYSTEM
Review and Critics:
The development of the electric vehicle ecosystem in Indonesia has drawn various opinions
and criticism. The key points from the source are :
1. Environmental problems: The nickel sector in Indonesia, which is an important sector
for electric vehicle (EV) batteries, is a carbon-intensive sector and has a negative impact
on the environment. This creates challenges for electric vehicle manufacturers who are
under pressure to manage environmental, social and governance issues in their supply
chains, including carbon emissions. Mining nickel for electric vehicle batteries causes
environmental and social damage, causing damage to the local environment and the
traditional way of life of local communities.
2. Government support and ambition: The Indonesian government has stated its
ambition to develop a nickel-based electric vehicle industry, including processing and
refining as well as the production of battery components. The company aims to become
a global electric vehicle battery powerhouse and has set ambitious goals regarding the
number of electric vehicles in circulation and the share of electric vehicles in vehicle
sales.
3. Investor interest and industry growth: Indonesia's electric vehicle-friendly policies
are attracting global investors to the country, and the country's wealth of natural
resources, which are important for electric vehicles, provides significant support for
electric vehicle investment. The country has signed contracts worth billions of dollars
with various manufacturers to produce batteries and electric vehicles.
4. Challenges and Criticism: Indonesia faces challenges in developing a comprehensive
electric vehicle supply chain, and there are concerns about the environmental impact of
nickel mining and the use of coal for power generation. The electric vehicle ecosystem
in the country is considered to be still underdeveloped and needs to be proactive in
building an appropriate ecosystem to support the promotion of electric vehicles.
In short, the development of the electric vehicle ecosystem in Indonesia has generated various
enthusiasm, concern for the environment, and challenges related to supply chain development
and environmental impacts. The country's wealth of natural resources and ambitious goals are
attracting great interest and investment, but the impact of nickel mining on the environment
and the need for a more developed ecosystem to support the introduction of electric vehicles
has also attracted some criticism.

THE ARTICLE

BUILDING INDONESIA’ ELECTRIC CAR ECOSYSTEM

Indonesia is a country that has benefited from the paradigm shift to electric cars. The basic
material for electric vehicle batteries (EVBs) is nickel, and Indonesia is the world’s largest
nickel producer.

In April 2022, President Joko “Jokowi” Widodo signed a presidential regulation on the
development of the country’s EVs (Evs) and EV market.

The President also encouraged regional and municipal administrations to provide incentives
so Evs had prices that could compete with fossil fuel vehicles, and ordered state agencies to
start using electric cars to support the policy.

This means that Indonesia has formally entered the era of Evs. This is vital to reducing high
pollution levels and carbon emissions in big cities, which are now a global issue.

However, this policy has not been without it detractors. Many think that Evs are very
expensive and unaffordable to the lower middle class. As such, fossil fuel vehicles are still
preferred among the lower middle class. Arguing the pros and cons of government policy is
normal.

Indonesia is a country that has benefited from the paradigm shift to electric cars. The basic
material for electric vehicle batteries (EVBs) is nickel, and Indonesia is the world’s largest
nickel producer. According to data from the Nickel Booklet 2021, Indonesia has 72 million
tonnes out of 139 million tonnes of the world’s nickel reserves, contributing 52 percent to the
world’s nickel supply, far above Australia (15 percent), Brazil (8 percent) and Russia (5
percent).

This means that Indonesia has an important role in the global supply of nickel as a raw
material, so it has a good bargaining position in the development of global Evs. Indonesia can
also control global nickel prices, which are relatively stable. If many automotive
manufacturers get into Evs and many countries start implementing EV policies, the price of
electric cars will gradually become affordable and Evs will eventually replace fossil fuel
vehicles.

The EV policy is crucial to replacing fossil fuel vehicles. Indonesia is one of the largest
automotive markets in Asia. The majority of vehicles in Indonesia use fossil fuel (BBM). In
fact, our oil reserves have continued to decline since 2004 from 1 million barrels per day
(bpd) to reach 750,000 bpd in 2022. The production capacity of the refineries of state-owned
oil and gas company Pertamina only reaches 800,000 bpd.

With a population of 260 million people and a booming national industry, domestic oil
consumption reached 1.4 million bpd and is likely to continue increasing in line with both
population and economic growth. This is not surprising that since Jokowi’s first term in 2014,
the oil and gas trade balance has continued to post a deficit due to excessive oil imports. On
that basis, the public needs to welcome the steps the government is taking to encourage the
development of electric cars.

EV ecosystem

The evolution towards Evs will have a very large multiplier effect on the nation’s mining
industry. In addition to anticipating a trade deficit due to oil and gas imports, the EV policy
can encourage value-added natural resources (SDA), especially copper, manganese and
nickel.

These three minerals are the raw materials for developing EVBs. The downstream mineral
resources policy obligates all mining companies to build local smelters.

One of the world's largest metal producers, estimates that the EV policy will increase copper
demand by 18 percent by 2030, while global nickel demand will grow 55 percent over the
same period.

Many parties are pessimistic because the domestic market cannot absorb the output of
processed products from copper, bauxite and nickel smelters. However, with the development
of the EV policy, processed copper and nickel products can be absorbed easily in the country.
Glencore, one of the world's largest metal producers, estimates that the EV policy will
increase copper demand by 18 percent by 2030, while global nickel demand will grow 55
percent over the same period.

In the EV manufacturing ecosystem, copper is used in the development of power networks,

storage networks (energy reservoirs) and charging infrastructure. According to Glencore, the
copper demand for charging equipment alone will grow from 23,000 tonnes in 2020 to
392,000 tonnes in 2030.

This is certainly good news for copper producers, such as PT Freeport Indonesia, which has
built a copper smelter in Gresik, East Java, with a capacity of over 1 million tonnes per year.
With the development of the electric car ecosystem, processed copper products will easily be
absorbed. Meanwhile, nickel demand for grid energy storage will grow from 20,000 tonnes in
2020 to 150,000 tonnes in 2030, while overall nickel demand for EVs will grow from 66,000
tonnes in 2020 to 985,000 in 2030.

However, not all types of nickel can be used as the basic material for EVBs. Class 2 nickel is
not suitable for electric car batteries, while it is suitable for providing ferronickel as a base
material for the stainless steel industry.

Only Class 1 nickel (pure nickel) or nickel sulfate is suitable for use in electric car batteries.
PT Vale Indonesia is building nickel sulfate smelters with a capacity of 73,000 metric tons
(mt) in Bahodopi, Central Sulawesi, and 120,000 mt in Pomala, Southeast Sulawesi, with an
investment of US$6 billion. Not many nickel miners have built smelters the produce nickel
sulfate.

Since the ban on nickel exports in 2020, nickel producers have been committed to developing
nickel smelters. However, the majority of nickel producers have only built ferronickel plants
for stainless steel factories. PT Aneka Tambang (Antam), for example, has built a 27,000 mt
ferronickel smelter in Pomala and a 13,000 mt ferronickel smelter in East Halmahera.

Vale has also built a nickel matte factory in Sorowako, South Sulawesi, that has an annual
capacity of 72,000 mt. There are many Chinese companies developing ferronickel smelters
across Central Sulawesi, Southeast Sulawesi and Halmahera. These Class 2 nickel processing
plants have also contributed to the decline in nickel prices.
McKinsey reported in 2017 that the expanding development of Class 2 nickel processing
plants had contributed to lowering nickel prices from $29,000 per tonne in 2011 to $8,000 per
tonne in 2016, when then affected EV prices.

The State-Owned Enterprises (SOEs) Ministry thus formed the Indonesia Corporation (IBC)
as a joint venture between Pertamina, state electricity company PLN, mining holding
company MIND ID and Antam. Antam, which has many upstream nickel concessions, is
expected to supply Class 1 nickel to the IBC's nickel sulfate smelters.

MIND ID and Antam also have smelter development experience, and the two are expected to
increase the nickel sulfate production capacity, so the development of the EVB industry runs
smoothly.

The costs of developing the EV ecosystem are quite high.

Meanwhile, PLN and Pertamina are to handle the downstream, with PLN providing power
and energy storage networks. The electricity supplied to the IBC's smelters is expected to be
environmentally friendly and generated from renewables, such as a geothermal power plant
(PLTP) or a hydroelectricty power plant (PLTA), to support the nation’s energy transition
program. Meanwhile, Pertamina is to provide battery chargers as well EV charging stations.

The costs of developing the EV ecosystem are quite high. It is thus highly appropriate that the
IBC has partnered with CATL (China) and LG Chem (South Korea), which have the
technological and marketing capabilities for exporting EVB products.

The IBC needs $15 billion to produce EVBs with a capacity of 140 gigawatt-hours (GWh) to
meet the domestic demand of 60 Gwh by 2035 for an estimated annual production of 400,000
four-wheeled EVs and 3 million electric motorcycles.

The next questions are whether the market can absorb the EVBs produced by the IBC and the
future prospects for the IBC. The answer, of course, is that they will be absorbed as global
EV manufacturers expand.

The China Association Of Automobile Manufacturers (CAAM) stated that EVs in that
country had increased to 1.7 million units in 2019 from 1.6 million units in 2018. Meanwhile,
sales of fossil fuel cars had begun to decline, falling 13 percent or 4.82 million units per year
in 2019, while EV sales increased 118 percent to 254,000 units per year.

McKinsey reported this year that global electric car production was projected to grow from
20 million units in 2017 to 31 million units in 2025.

As global EV sales grow, China's electric car giants and several other global EV
manufacturers have been making huge profits.

One of China's largest EV manufacturers, BYD Company Ltd., for example, sold 73,172 EVs
in 2019. Interestingly, BYD's sales of full EVs grew 786 percent to 45,487 units in 2019.
That same year, it sold 105,094 EVBs, an increase of 229 percent compared to 2018.

It is not just China's electric car companies that are making a profit. The world's largest
electric carmaker, the United States’ Tesla, is also making a profit.

Tesla has reported that its sales will triple this year. Its largest market share is Europe, where
it has annual sales of 115,950 EVs. Tesla's electric car factory in Shanghai also sells 150,000
electric cars per year. Tesla has an ambitious worldwide target to sell 500,000 electric cars
per year, and in 2022 alone, Tesla is targeting sales of 400,000 EVs.

Considering the growth in electric car manufacturers and global demand for electric cars, it is
not surprising that market capitalization of EV manufacturers is growing rapidly. Tesla, for
example, has a market cap of $42.14 billion, above Ford Motor Company ($38 billion), but
still below General Motors ($56.7 billion). These two other giants are also eyeing the
Indonesian domestic market.

Recent reports show that BYD and Tesla have introduced electric cars to the Indonesian
market through Blue Bird, the largest taxi operator in the country. Meanwhile, Hyundai has
promised the government it will produce EVs in Indonesia, targeting both domestic and
foreign markets.

With such rapid market growth, it is self-evident that the IBCs batteries will be absorbed by
not only the domestic market, but also the global market. It is not impossible that the IBC, as
an EVB supplier, will become Asia’s EVB king and eventually rule the world. The most
important thing is that the IBC is obliged to implement good corporate governance and be
transparent and professional in managing its business.

SOEs collaboration

The global EV revolution is a blessing for Indonesia, which is rich in natural resources, such
as nickel, cobalt, copper and manganese. Indonesia does not have to be a player in the electric
car industry or get the IBC to produce electric cars. Indonesia is expected to support the
electric car ecosystem by building a world-class EVB factory. With that, IBC has a strong
bargaining position with respect to global EV manufacturers.

The key is collaboration among the SOEs within the IBC. The mining products of MIND ID's
subsidiaries, such as Antam, PT Timah (cobalt/tin) and MIND ID (aluminum), have a
significant role in developing the battery industry.

Let's take the steps to become a country capable of developing a global EVB ecosystem.

PLN must be able to supply environmentally friendly electricity to the IBC’s factories at
economical prices. Pertamina must be ready to provide various supporting facilities in the
downstream, such as charging stations that make it easier for consumers to use EVs.

The development of the EV ecosystem, pioneered by the state-owned miner, is the key to
Indonesia's success in supporting the domestic and global EV industries. It is enough for
Indonesia to be a product user (consumer). Let's take the steps to become a country capable
of developing a global EVB ecosystem.

Link : https://www.kompas.id/baca/english/2022/11/09/building-indonesia-electric-car-ecosystem