Infrastructure and SMEs Keys to Spur Mass Adoption of Electric Vehicles in Indonesia

Indonesia recently passed a number of incentives for electric car drivers and manufacturers, designed to help the country compete with Singapore and Thailand as hubs for electric vehicles in Asia in both adoption and manufacturing.

The measures include changes to tax vehicles based on fuel consumption and carbon emissions (rather than type and engine size currently) and rules that require 80 percent of car parts to be locally manufactured by 2029.

While these measures will go some way to driving (excuse the pun) demand for electric vehicles, the real game-changer will be in the development of an electric charging infrastructure that can support millions of new vehicles.

President Joko "Jokowi" Widodo specifically cited the need to "… go ahead and prepare the infrastructure to support electric vehicles" as a reason for signing the bill, yet there are a number of things the government should do to support this.

Charging infrastructure is important because, without ubiquitous electric charging points, consumers simply will not purchase and use electric vehicles. Yet without a large enough market of electric vehicle users, companies will not invest in the charging infrastructure needed, so we have a "chicken and egg" situation.

Governments including India and China have tried to step in and build this infrastructure, yet developing thousands of electric charging points in a congested city like Jakarta would be incredibly expensive and disruptive. Land would need to be set aside, new cabling would need to be installed and all this would cost billions of rupiah.

The Indonesian government should look toward the country's thousands of small and medium enterprises (SMEs) to build the charging infrastructure at little to no cost to the taxpayer. To do this, we need to target the commercial sector first before the consumer.

Unlike the average consumer, most businesses who use vehicles do so because it helps them make money – they ferry passengers or goods to and from a destination. Each vehicle would make, or help to make, a profit, therefore we should allow firms to make a profit from charging stations which would then encourage them to build more.

For example, if a local catering firm delivered daily food supplies to local restaurants using electric vehicles, they should be able to invest in and use their own charging station. Each time the vehicle returned from a delivery they could recharge while being reloaded.

However, we should also allow that same firm to offer charging services to neighboring companies (say, the next-door logistics firm) for a fee. Now that same charging point becomes a revenue generator. Once local businesses and entrepreneurs are able to make a profit they are incentivized to build more charging points throughout the city, thus developing a charging ecosystem.

Once these "power entrepreneurs" have created a viable charging infrastructure, the consumer will follow both because there are sufficient charging points and because they will see more electric vehicles zip around their city on a daily basis.

Lowering taxes will help users afford electric vehicles – partially solving the financing challenges – and better technology (such as ultracapacitor batteries which charge in minutes) will allow electric vehicles to do more. But for Indonesia to catch up, and overtake Singapore and Thailand, it should look to the thousands of SMEs that ply the streets of its cities every day.

Saurabh Markandeya is the co-chief executive of SHADO Group, a company based in India and Singapore that specializes in electric vehicle technology and charging infrastructure.