Tuesday, July 16, 2024

Vietnam’s VinFast invests US$1.2 billion in Indonesia’s assembly plant

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Gusty da Costa




Vietnam’s electric vehicle (EV) manufacturer, VinFast, which has entered Indonesia earlier this year, is setting up a new dealership in the Jakarta suburb of Depok and will soon invest US$1.2 billion to build a local assembly plant with a capacity of 60,000 cars per year.

Backed by AC Ventures, local automotive service and repair startup Otoklix recently inked a deal with VinFast to serve as the brand’s authorized service provider for customers nationwide. Otoklix is an online-to-offline solutions startup that is digitizing the automotive aftermarket sector in Indonesia.

The Indonesian Ministry of Industry has updated its roadmap for electric vehicle transition, targeting domestic production of 600,000 electric cars by 2025. Indonesia’s ambitious EV adoption plan underscores the critical need for robust nationwide charging and battery-swapping infrastructure. But equally crucial is the development of a comprehensive aftersales service and repair sector for a new class of vehicles.

Co-founder and CEO of Otoklix, Martin Reyhan Suryohusodo, said Indonesia is one of the few countries where the government is actively supporting EVs, a commitment expected to continue under the incoming president. The government’s investment focuses on essential infrastructure elements such as expanding the charging station network and enhancing financing options.

Martin was of the opinion that global investors should consider the future of battery charging versus battery swapping in Indonesia.

“Battery swapping stations require significant capital investment in infrastructure. Currently, NIO (a Chinesea mobile internet-based power solution) in China is a notable example where heavy investments have been made in this technology. Tesla initially considered this approach but abandoned it due to the high costs involved,” he said.

A critical issue for global investors interested in Indonesia’s EV market is regulatory clarity concerning the commercial sale of electricity, he added.

Currently, all commercial electricity sales must go through PLN, Indonesia’s state electricity company, which could pose a challenge for any third-party charging station provider.”

Skills first, supplies later

Martin touched on the long-term impacts of EV adoption on the automotive aftermarket. He pointed out that as vehicle technology evolves, specialized services, particularly those related to battery maintenance and software management, will become increasingly in demand.

Otoklix’s proactive investments today in training and infrastructure aim to position the company at the forefront of a new era. The company has launched an academy dedicated to training mechanics in the intricacies of EV servicing. The initiative addresses the urgent need for a workforce skilled in the specific requirements of electric vehicles, focusing on safety and technical proficiency.

Martin addressed the potential role of Indonesia’s nickel reserves in workshop supply chains.

“Currently, we’re not focusing on that, despite the country having the largest nickel reserves globally. The shift in the EV industry toward lithium batteries, which are more economically viable, influences this decision,” he said.

Martin added that Indonesia requires a specific type of smelter for nickel processing suitable for battery production, known as HPAL (High-Pressure Acid Leach). This method demands intensive purification processes. Currently, only two or three companies in Indonesia operate such smelters, and their output is primarily exported.

On the horizon

Martin provided insights into the future of the EV sector in Indonesia, citing that over the next 10 years, as the EV market expands, Otoklix expect to see a rise in demand for car parts that are as good as original parts but more affordable. This includes mechanical parts and components of batteries, like individual cells, but not whole batteries.

“We plan to partner with companies that make these parts instead of making them ourselves. This will enable us to supply independent workshops with components, offering EV owners more affordable and competitive options beyond just original parts,” Martin said.

He added that it’s also important to recognize that gas-powered vehicles, including hybrids and emerging hydrogen power vehicles like those Toyota is investing in, will continue to coexist. It’s unrealistic to forecast a 100 percent market share for EVs. Also, the growth of the EV market crucially depends on continuous investment in infrastructure.

“This is a classic chicken-and-egg situation: the sale of EVs cannot outpace the development of supporting infrastructure, including financing options and a robust secondary market, which is essential for supporting the transition,”he said.

Gusty da Costa






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