Transition to Electric Vehicles Could Reduce Subsidized Fuel Compensation

An officer charges an electric car at the General Electric Vehicle Charging Station (SPKLU) in the Fatmawati area, Jakarta, Saturday (12/12 - 2020). ANTARA PHOTO\\r\\n

The Indonesian government’s efforts to accelerate the transition from conventional vehicles to electric vehicles are expected to bring many positive changes. This transition to electric vehicles has the potential to reduce the size of subsidized fuel compensation by up to $5 billion or IDR 74.25 trillion per year by 2035.

Toto Nugroho, Director of Indonesia Battery Corporation (IBC), believes that the trend of using electric vehicles in Indonesia is predicted to increase significantly.

In fact, the production of electric two-wheeled vehicles is estimated to reach 9 million units by 2030, while four-wheeled vehicles will almost reach 600,000 units.

According to Toto, the potential reduction in fuel consumption originally from imports can be replaced with electricity generated from domestic power plants. The potential reduction in fuel imports in 2023 is projected to reach 23 million barrels per day.

“We have the potential to reduce imports by nearly 23 million barrels per year by 2035. Perhaps $4-5 billion per year,” he said in a hearing with Commission VII on Wednesday, April 12, 2023.

In addition to these savings, the use of electric vehicles also has the potential to reduce greenhouse gas emissions in the transportation sector. The reduction is estimated to reach nearly 9 million tons of CO2 equivalent per year.

“It’s almost 9 million per ton per year, 6-8% of total transportation, so it’s a very strategic issue, and from an energy perspective, it’s a game-changer if we apply the EV ecosystem,” he said.

Furthermore, Indonesia not only aims to transition to electric vehicles but also aspires to become the “king” of electric vehicle batteries. However, to achieve this goal, Indonesia must be prepared to compete with the three current “rulers” of the world, namely the United States, Europe, and China.

Toto explained that the global demand for electric vehicle batteries will reach 5,300 GWh by 2035, dominated by the demand for four-wheeled electric vehicles. Meanwhile, the demand for electric vehicle batteries mainly comes from three regions, namely the United States, Europe, and Asia.

Therefore, he said that his company is continuously striving to improve its capabilities and partnerships to boost the battery ecosystem in Indonesia. According to him, these partnerships are critical to realizing battery projects.

“We see that partners are very important because in terms of technology, funding, and the battery market, they are still dominated by the three camps of America, Europe, and China,” said Toto during the hearing with Commission VII of the Indonesian Parliament on Wednesday, April 12, 2023.

However, according to Toto, Indonesia is targeted to become the EV Battery Production Hub in Southeast Asia. Moreover, Indonesia has the necessary raw materials, especially nickel, for the production of electric vehicle batteries.