Mapping Indonesia’s Battery Electric Vehicle Ecosystem: Opportunities and challenges

Indonesia’s automotive industry stands on a solid foundation, backed by hundreds of trillions of rupiah in investment. By early 2026, the EV market had grown at an annual rate of more than 140% in 5 years, with over 340,000 units on the road and expanding local manufacturing capacity. Dozens of firms now produce electric two-, three-, and four-wheel vehicles, supported by rising investment, while production growth and supporting policies are in the process of aligning with current market momentum.  

Batteries at the Centre of the Challenge

Batteries are the core of Indonesia’s EV ecosystem. Under current local content requirements, they account for 40% of an EV’s total value—rising to 50% from 2030 onward. Developing a domestic battery industry is central to meeting policy goals. 

To build on this momentum, a clearer unified direction regarding growth pathways would help outline how the industry should grow, what technologies to prioritize, or how different parts of the supply chain should connect.  

Globally, the market has shifted toward lithium iron phosphate (LFP) batteries, which are cheaper and now dominate EV sales. This trend is already visible in Indonesia, where most EVs sold today use LFP. Currently, Indonesia’s abundant nickel reserves mean its strategy is tied to nickel-based batteries. This creates a gap between what the market prefers and what the resource strategy supports. However, both technologies can coexist: LFP for domestic adoption due to lower cost, and nickel-based batteries for exports or specialized use. Clearer policy direction would help bridge this gap. 

When Small Barriers Slow Big Investments 

Beyond industrial strategy, technical issues can slow progress. Investors pointed to challenges such as overlapping business classifications and permitting systems that need to accommodate real-world conditions, like mixed land ownership within a single project. These issues, which may seem minor, can delay projects that are otherwise ready to move forward. Streamlining these processes could help translate plans into on-the-ground progress. 

Scaling up domestic battery production also remains a hurdle. Production is not easy to localize when volumes are still relatively small, and varied specifications across manufacturers make standardization difficult. This raises a practical question: at what point does domestic production become commercially viable? 

Energy is another critical factor. Producing batteries and processing materials like nickel requires significant amounts of electricity. Costs and supply arrangements, whether through the national grid or independent sources, play a major role in determining industrial competitiveness. At the same time, adequate electricity infrastructure is also crucial to support growing EV adoption, including charging infrastructure expansion. 

Preparing for What Comes Next 

The first wave of EV batteries in Indonesia will reach end-of-life around 2029–2030, making recycling an emerging priority. Building recycling capacity takes time, and so preparation needs to start now. Current regulations classify batteries as hazardous waste, which adds complexity and cost to recycling efforts. Adjusting this classification could open the door to a more circular system, where valuable materials are recovered and reused. 

In parallel, global expectations are changing. International markets increasingly demand more transparency, including on supply chain data. Indonesia is well-positioned to meet these expectations, but it needs stronger systems for tracking and reporting. Strengthening these systems would help safeguard future access to export markets.  

The shift to electric vehicles will also bring changes for workers and small businesses tied to traditional automotive components. With adequate preparation, the transition can be managed smoothly at the local level. 

Training, reskilling, and support are essential for small enterprises to adapt. Ensuring that the transition is manageable for those directly affected will be key to maintaining long-term momentum. 

From Progress to Alignment 

Overall, the discussion reflected a shared understanding that Indonesia’s EV ecosystem is moving forward, with continued efforts needed to further strengthen alignment. Investment is growing, production is increasing, and the foundation is strong, while clarity on battery technology choices, a more integrated industry roadmap, and stronger institutional coordination are still evolving. 

The next phase will depend on the execution of existing plans. This includes resolving remaining licensing bottlenecks, providing greater certainty on incentives, and enhancing domestic readiness to prepare for what comes next—from meeting global market requirements to domestic innovation capacity. With clearer priorities and fewer bottlenecks, the different parts of the ecosystem can begin to connect more effectively.