BYD Auto, the popular Chinese manufacturer of electric vehicles, launched three of its passenger EV models—the SEAL sedan, Atto 3 SUV, and the Dolphin hatchback—in Indonesia on Thursday.
The entry of BYD into the archipelago is expected to attract more EV makers to launch their products in the country. “We expect more EV makers to come to Indonesia. BYD is also planning to set up EV facilities in Indonesia that can not only meet domestic consumption but also cater to the export market,” Rachmat Kaimuddin, Indonesia’s deputy minister of investment told reporters on Thursday.
BYD is expected to invest around $1.3 billion to build facilities in Indonesia. The automaker is targeting a production capacity of 150,000 units a year, according to Airlangga Hartarto, coordinating minister of economic affairs of Indonesia.
Indonesia has set a target to achieve an annual production capacity of 600,000 EVs by 2030. BYD is expected to help Indonesia in meeting this target.
So far only two EV automakers have EV manufacturing facilities in Indonesia—China’s Wuling and South Korea’s Hyundai.
In 2023, Chinese carmaker Geely Automotive Holdings agreed to help Indonesia build a homegrown electric car by 2025 or 2026, in response to a call from the government. Geely had last year teamed up with Malaysian partner Proton Holdings to stage a comeback in Southeast Asia’s electric vehicle market, fueled by a $10 billion investment in Malaysia.
In a similar vein, Vietnamese automaker VinFast plans to invest at least $1.2 billion in Indonesia over the long term to distribute vehicles and establish an electric vehicle manufacturing plant, according to an announcement earlier this month. The first EV car of VinFast is expected to launch in Indonesia in 2026, Indonesian President Joko Widodo told reporters last week.
Competitive pricing
BYD is still in discussions with the government to fix the prices for its EVs in Indonesia and will make its first delivery in the first half of 2024.
The strength of Chinese automakers is their ability to produce affordable vehicles, according to Kukuh Kumara, secretary general of Indonesia Automotive Manufacturers Association (Gaikindo). This compels other automakers to limit their own prices and improve quality before launching in Indonesia.
Bisman Bhaktiar, executive director at the Center for Energy and Mining Law (PUSHEP) said that initially, EV makers have to eke out huge investments to build facilities in Indonesia. However, the facilities will prove beneficial later as the EV makers can produce more affordable EV cars for the local market.
“When investing in Indonesia, it is also more beneficial to the companies if they can form partnerships with local companies as that secures raw material supply,” he told DealStreetAsia.
The government, for now, still incentivises foreign EV makers by giving a tax holiday on completely built-up (CBU) cars until the end of 2025. After the tax holiday ends, the EV makers are expected to build their facilities in Indonesia.
Meanwhile, to drive domestic EV consumption, the government plans to impose taxes on non-EV vehicles and use the taxes to subsidise mass transportation. The plan is still being discussed by the government, said Luhut Binsar Panjaitan, coordinating minister of maritime and investment affairs of Indonesia.
Kaimuddin said that the government and the parties involved in the EV industry are still building the ecosystem, including EV batteries, and supporting facilities. With the comprehensive ecosystem, it is expected that Indonesia can meet a domestic demand of 1 million EV units and 500,000 EV units for the export market.
With these huge EV demands, Indonesia is expected to be one of the largest EV automakers in the world, compared to Thailand where car penetration is stagnating, according to Kumara of Gaikindo.
Liu Xiueliang, General Manager of BYD Asia Pacific said the company will make Indonesia one of its important markets, along with Thailand.
BYD had previously begun construction of an EV plant in Thailand.