The political economy of electric vehicles in Indonesia

TPP Director Neil McCulloch worked with the international climate change think tank E3G and the Indonesian think thank the Institute for Essential Services Reform  to explore the political economy of electric vehicles in Indonesia. This was part of E3G’s wider project to update a Political Economy Mapping of Indonesia’s climate action based on E3G’s methodology. TPP led a deep-dive to understand the key drivers and constraints to the development of the electric vehicle sector. 

The sector is developing rapidly in Indonesia. In recent years, billions of dollars have been invested in exploiting the country's huge nickel reserves and building refining and processing facilities. Now Indonesia is attracting major investments in battery production, as well as in the manufacture of electric vehicles. There were virtually no electric vehicles less than five years ago and over 100,000 now, with several more large investments in the pipeline.

However, the development of the sector faces major uncertainties. Access to the US and European markets is constrained by concerns over the environmental damage caused by nickel mining and processing, as well as geopolitical opposition to the high level of Chinese investment. The dominant Japanese Internal Combustion Engine manufacturers are promoting an alternative, multi-fuel, model of transition. And President-Elect Prabowo, who takes office in October 2024, has expressed strong interests in promoting the production and use of biofuels.

The TPP-led PEA puts forward recommendations for how external actors and development partners can best support the further development of the sector in a way that reduces pollution and enhances sustainability.