Why BYD, GAC Aion, and Citroen are Betting Big on Indonesia’s EV Market

Indonesia is taking bold steps to establish itself as a hub for electric vehicle (EV) production in Southeast Asia by offering attractive tax incentives to global car manufacturers. Starting in 2025, leading automakers—China’s BYD and GAC Aion, along with France’s Citroen—will benefit from exemptions on import taxes and a reduced luxury sales tax rate of 15 percent. Announced by Industry Minister Agus Gumiwang Kartasasmita, these measures aim to lower manufacturing costs and drive up local EV production and sales.

This strategic move highlights Indonesia’s commitment to creating a competitive regulatory environment for global investors and aligns with the government’s ambition to transform the country into a regional hub for battery-powered electric vehicles.

Commitments from global EV manufacturers

The Indonesian government’s incentive programs are already bearing fruit by drawing commitments from leading EV manufacturers. BYD, one of the largest global electric vehicle producers, has expressed plans to establish a manufacturing presence in Indonesia. This expansion aligns with BYD’s ambition to increase its market share in Southeast Asia.

GAC Aion has also announced its intention to build a plant in Indonesia, focusing on EV assembly and battery production. This move supports Indonesia’s goal of increasing local production capabilities. Citroen, a major French automaker, is similarly exploring investment opportunities, signaling a growing confidence in Indonesia’s EV market potential.

The three carmakers—BYD, GAC Aion, and Citroen—have all committed to building factories in Indonesia. In return, they will benefit from an exemption on import taxes for machinery and equipment, as well as a reduced luxury sales tax rate of 15 percent. These incentives are designed to lower the cost of manufacturing and encourage more foreign investment in the EV sector.

Indonesia’s EV market projections

The Indonesian EV market is expected to experience remarkable growth over the next decade. In 2022, the market was valued at approximately US$ 533 million. By 2029, it is projected to reach US$ 2 billion, driven by a compound annual growth rate (CAGR) of 20.96 percent. This rapid expansion is supported by the government’s ambitious targets for EV adoption. By 2025, Indonesia aims to have 2.1 million electric motorcycles and 400,000 electric vehicles on the road, with 20 percent of these being manufactured locally. By 2030, the government’s target will increase to 2.2 million electric cars and 13 million electric motorcycles.

Indonesia’s downstream nickel industry and supply chain potential

Indonesia’s ambitions to become a leading hub for electric vehicle manufacturing extend beyond assembly plants and incentives. The country is strategically investing in developing a robust supply chain that covers every aspect of EV production, with a particular focus on nickel processing. As the world’s largest holder of nickel reserves, Indonesia has implemented policies mandating the domestic processing of nickel ore. This has led to significant value addition and export growth.

Indonesia’s nickel-related export revenue surged from US$6 billion in 2013 to nearly US$30 billion in 2022, driven by higher-value-added products such as stainless steel and battery materials. The establishment of domestic smelters has been instrumental in this growth. As of mid-2023, 43 nickel smelters were in operation, with additional facilities under construction. These smelters ensure that raw nickel is processed locally, supporting the production of EV batteries and positioning Indonesia as a key supplier in the global EV value chain.

In addition to nickel, Indonesia is fostering partnerships with international firms to develop other critical components such as lithium, cobalt, and manganese, all essential for EV battery production. By securing a steady supply of these materials, the country aims to become a major supplier of EV batteries for global markets. The government has also initiated joint ventures with South Korean and Chinese firms to set up battery production facilities, enhancing technological capabilities and workforce skills.

Collaboration with international partners

Indonesia’s drive toward EV leadership is not happening in isolation. The country is leveraging partnerships with global stakeholders to accelerate its progress. Collaborations with countries like China, South Korea, and Japan are helping to bring in expertise, technology, and investment. For example, South Korea’s LG Energy Solution and China’s CATL (Contemporary Amperex Technology Co. Ltd.) have committed to building battery plants in Indonesia, ensuring the nation plays a central role in the EV supply chain.

Additionally, Indonesian officials are actively courting European and American manufacturers, aiming to diversify partnerships and reduce dependency on any single country. These collaborations are not only bringing capital and technology but also helping to develop local talent through knowledge transfer and training programs.

Infrastructure and battery production plans

A critical component of Indonesia’s EV strategy is developing the necessary infrastructure to support widespread EV use. The state-owned power company PLN plans to install over 31,000 additional charging stations by 2030. This development is crucial for addressing concerns about charging availability and encouraging more consumers to switch to electric vehicles.

Indonesia’s downstream nickel industry also supports the country’s goal of becoming the third-largest producer of EV batteries by 2027. By 2030, Indonesia targets an annual battery production capacity of 140 GWh. This focus on battery production not only supports local EV manufacturing but also strengthens Indonesia’s position in the global supply chain for electric vehicles.

The road ahead for Indonesia’s EV industry

By focusing on a complete ecosystem, international partnerships, and job creation, Indonesia is paving the way for a sustainable and prosperous EV future. The strategic decision to offer tax incentives for EV manufacturers, combined with its natural resources, ambitious growth targets, and downstream nickel industry, positions the country to become a regional leader in electric vehicle production.

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