February 16, 2024
JAKARTA – German carmaker BMW is poised to invest in electric vehicle (EV) production in Indonesia, according to Coordinating Economic Minister Airlangga Hartarto.
During a visit to the Indonesia International Motor Show 2024 in Kemayoran, Jakarta, Airlangga said on Thursday that the car company was likely to adopt a completely knocked down (CKD) scheme for its EV operations in the country.
“They already have a [local] facility,” Airlangga said, referring to BMW’s existing Indonesian production facility. He refused to provide further details, telling reporters: “Ask BMW directly.”
A CKD model refers to the local assembly of imported parts, which potentially could unlock government incentives.
Analysts previously suggested that CKD schemes could be a path for carmakers to increase the local content level of their products, making them eligible for tax incentives.
BMW Group Indonesia communications director Jodie O’Tania told The Jakarta Post on Thursday that “local EV production would be highly possible,” but she added that the plan was not feasible for the moment because the company’s existing EV models fall short of the local content level required by the government.
“That has always been our strategy [to establish local EV assembly],” Jodie said. “But if we want to join the incentive program, we can’t fulfil the requirements for now.”
BMW has been assembling CKD internal combustion engine (ICE) cars in Indonesia through PT Gaya Motor Production, but the company still imports EVs as finished products directly from Germany.
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Chinese automaker Chery also recently expressed interest in starting production in Indonesia but said it would conduct market research for at least three years before committing to a manufacturing facility.
In the meantime, Chery leveraged a partnership with PT Handal Indonesia Motor for CKD assembly to produce vehicles for the Indonesian market, as well as for the neighboring Southeast Asian markets of Vietnam and the Philippines.
“We’d like to test out the market first before we set up our manufacturing plant,” Chery Indonesia brand department head Rifkie Setiawan said on Thursday, citing cost concerns.
On the other hand, Chinese EV giant BYD is set to unveil a production plant “sometime this year”, BYD Indonesia president director Eagle Zhao said on Thursday.
The announcement follows the company’s recent entry into the Indonesian market with three EV models imported from China as finished, or completely built-up (CBU), products. Zhao declined to disclose investment details.
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The government targeted the sale of 200,000 EVs and hybrid cars this year, more than double the 80,000 units sold last year.
The Office of the Coordinating Maritime Affairs and Investment Minister warned that EV manufacturers might struggle to meet regulations if they did not eventually use domestically produced batteries.
Through recent policy changes, manufacturers now will have until 2026 to reach the 40 percent minimum local content requirements for domestically sourced components.