A primer for a hot topic in a hot sector, amidst our generally warmer Earth.
This post was first drafted for Marketeers.com as a thought leadership article, clocking in at 1720 words; probably one of my longest essays ever. It later got translated into Bahasa Indonesia and was scaled back to 1019 words. I reproduce this essay in its unedited form as a matter of record.
I think (and dream) about the EV ecosystem in Indonesia a lot. I founded ION Mobility amidst the pandemic and started building my teams in Singapore and Jakarta in 2020 to undertake a full-stack, end-to-end approach to the design, engineering, and manufacturing of our inaugural “Mobius” M1-S electric motorcycle. Today, I lead our multidisciplinary team of over 70-strong designers, engineers and entrepreneurs to focus on the Indonesian electric two-wheeler market. It is from this vantage point with which I share my thoughts on this topic with you.
Why does it matter? What do we need to keep in mind?
Discussions around a thriving and sustainable EV ecosystem in Indonesia, particularly centred on electric two-wheelers, have gained momentum in recent months. The numbers highlight the reasons behind this rising clarion call.
Indonesia is the third largest motorcycle market in the world, with an automotive industry that contributes slightly over 10% to its GDP. The country is also home to slightly over half of the world’s nickel deposits — a raw material that is gaining even greater significance in the production of modern EV batteries as battery cell makers migrate towards stable lithium-ion formulations that are nickel-rich; with the proportion of nickel used rising from 50% (NCM 5:3:2) just years ago, to 90% (NCM 18:1:1) in the past year. The 115+ million two-wheel vehicles (2Ws) that ply the country’s roads outnumber its 16+ million four-wheel vehicles by a 7-to-1 ratio, and are also responsible for at least 150 to 200 million tonnes [1] of Indonesia’s carbon dioxide emissions each year.
[1] 115 million motorcycles averaging 40km a day, 365 days a year, with an average fuel efficiency of 30km/l, with each litre of petrol producing 2.2kg of carbon dioxide when burnt.
Don’t even get me started on how fuel imports and subsidies continue to be a drag on Indonesia’s fiscal capacity to spend on other much-needed sectors like education and infrastructure; that is clearly another article meant for another day.
With such a compelling two-wheeler market that touches the lives of so many citizens and having significant potential to be a force for good (environmentally), the Indonesian government can be forgiven for wanting to protect its large domestic automotive market from foreign two-wheeler products that do not confer meaningful value-add through on-shore activities. At the end of the day, Indonesia is counting on its burgeoning EV ecosystem to spur greater innovation, create skilled jobs and uplift the livelihood of its workers in its automotive sector, all while working towards achieving its net zero emissions target by 2060 or earlier.
At the recent Bali G20, President Jokowi called for the importance of “transiting (from petrol to electric) without adversely affecting people and the need for international investment, technology and support.”. Nevertheless, those of us familiar with the innovation industry understand that technology-driven disruptions are seldom straightforward, and they often come with externalities and adverse impacts on the livelihoods of certain segments of the population as they unfold. Just as ChatGPT will cause massive worker and industry dislocation even as it drives new growth and value elsewhere, a similar impact will be felt across multiple sectors when EV goes mainstream. It is a fact that EVs require less parts and less maintenance, resulting in skills gaps forming not just from how electric two-wheelers are assembled and serviced, but also from how they need to be designed and engineered — not as analog vehicles of yore, but as digital, always-connected, always-on devices in an increasingly intelligent transportation network.
Luckily enough, hardware-led innovations don’t often disrupt at the speed of light that software-led breakthroughs do. As at the end of last year, electric two-wheelers form less than 0.03% (or more than 32,000) of all two-wheelers in Indonesia. It is safe to say that this paradigm shift in skills gaps and worker dislocation won’t yet be felt in an almost-entirely petrol-based Indonesian automotive sector that directly employs more than 350,000 people in the country, with an additional 1.2 million workers employed indirectly in related industries such as parts manufacturing, logistics and services.
In order to set the pace on President Jokowi’s “massive electrification” strategy, the Indonesian government has committed its vehicular fleet to full electrification in the next 3 years. It also recently announced its first year of electric vehicle incentives, subsidising IDR 7 million per qualifying electric two-wheeler. It is a promising start, but the authorities’ seemingly less ambitious incentive budget for this year — at IDR 7 trillion or a mere (2%) fraction of its IDR 336 trillion budget for fuel incentives in 2023 — is perhaps better interpreted as their tacit acknowledgement that the Indonesian EV ecosystem needs more time to prepare for the multi-decade marathon ahead of us. After all, as of now, there is a grand total of three electric two-wheeler companies with at least 40% in local content that qualify for this year’s incentives. The durability of electric conversions of petrol two-wheelers over the long run also needs to be proven.
We have only just begun. There is still time for all stakeholders to take note, take action and prepare for a different and more optimised (and rebalanced) future.
What goes into an EV Ecosystem?
An electric vehicle (EV) ecosystem typically includes a range of interdependent components and stakeholders that work together to support the production, distribution, adoption, and operation of electric vehicles. Some key components of an EV ecosystem include:
- Electric Vehicles (EV): This includes a wide range of electric vehicles, from passenger cars and commercial vehicles to electric motorcycles, scooters and even bicycles.
- Charging Infrastructure: This includes public and private charging stations such as the SPLU and SPKLU charging networks deployed by PLN, as well as home charging stations and proprietary fast charging networks.
- Energy Storage Systems (ESS): This includes batteries and other energy storage technologies used to power electric vehicles or serve as an alternative power source (from vehicle-to-grid). ESS can also serve as an energy storage “buffer”, to augment the grid at the house-, office-, building- or factory-level.
- Renewable Energy (RE): This includes clean energy sources like wind, solar, and hydro power that can be used to generate electricity to power EVs.
- Government Policies and Regulations: This includes a range of incentives and regulations that encourage the production, distribution, and adoption of electric vehicles, as well as regulations around vehicle emissions and fuel standards.
- Industry Players: This includes automakers such as ION Mobility, as well as other technology companies, service providers (GoJek and Grab), charging station providers, and energy companies, all of whom play a role in the growth and development of Indonesia’s EV ecosystem.
- Consumers: This includes individuals and businesses that purchase and use electric vehicles, as well as those who invest in the development of the EV ecosystem.
Overall, an electric vehicle ecosystem is a complex and dynamic network of stakeholders and components that work together to create a sustainable and efficient transportation system.
We at ION Mobility understand the importance of coexisting with the broader Indonesian automotive industry. The incumbency of established petrol-based players does not intimidate us, and is instead a sign that plenty of work remains. As unproven upstarts, we need to err on the side of caution and under promise while overdelivering on our commitments to our customers. As a purpose-driven player in the EV and ESS market, we will continue to set the pace in Indonesia and other Southeast Asian markets in the years ahead by sticking to our values and principles.
The ION Way; an Ecosystem Approach
Unlike most other EV players in Indonesia’s electric two-wheeler space, I have made it a point for my team and I to take the more challenging, less obvious but more sustainable path for the longer term. We believe it is the (better) way to achieve defensible competitive moats versus competing brands and products, while delivering a better product-to-market fit and ensuring the best possible tradeoffs between quality, performance and cost, so as to best serve our target consumer segments in Indonesia.
Whereas others buy components or licence entire electric two-wheeler platforms from China to quickly achieve local Completely-Knocked Down (CKD) assembly and faster go-to-market, here at ION Mobility, we believe in adopting a more holistic consumer-focused approach through an in-house, full-stack and end-to-end approach to our EVs. This means we end up spanning the full gamut of industrial and product design, mechanical, electrical, electronics, firmware and software engineering, as well as supply chain development and management, manufacturing and even direct-to-consumer sales, marketing and aftersales.
We have been working closely with our Indonesian-based suppliers since mid-2020 throughout the entire pandemic period to locally source and produce many of our motorcycle parts. Furthermore, where other EV players purchase battery packs from overseas suppliers, we undertake the design and engineering not just of our own battery packs and battery management systems, but also that of our own battery pack assembly line alongside our electric two-wheeler vehicle assembly line in Karawang Timur. This capability means the ION M1-S is in sight of achieving at least 70% in local content by the end of this year.
This hardcore approach requires extreme entrepreneurial hustle from a hands-on talent- and technically-attuned management team that spans a wide range of disciplines. It also demands a lot from every team member in our offices across Indonesia, Singapore, Vietnam and China; to constantly bring our A-game to the table even as we leave our egos at the door.
As we focus on production and redouble our efforts, we are beginning to witness some encouraging early results. These include pre-orders for our highly acclaimed M1-S product, as well as support from our suppliers and partners, new talent eager to join our team, and a recent investment of US$18.7 million, led by TVS Motors. This investment is a significant endorsement from the automotive industry, making us the sole team in Southeast Asia to receive such recognition.
We, just as the Indonesian EV ecosystem, have only just begun to contribute to the rising EV ecosystem in Indonesia. I can’t wait to show you how we will do our part for the Indonesian EV ecosystem, by bringing more investments into the country, train talent, transfer technology and know-how and work closely with Indonesia’s EV supply chain to move the needle forward in a big way.
But most important of all, we still have to ship that M1-S bike. Let us all walk this talk together; See you on the better side in the future!
