PT Indika Energy Tbk (INDY) is considering jointly investing US$2 billion with Taiwan-based Foxconn in electric vehicle (EV) manufacturing, batteries, and energy storage. A partnership was established between Foxconn, Indika, and two other entities earlier this year in a memorandum of understanding to collectively invest US$8 billion in EV and battery manufacturing in Indonesia.

A feasibility study for the Foxconn-Indika venture should conclude by the fourth quarter this year, at the latest, Indika's group CEO Azis Armand said in an interview with Reuters on Wednesday. "The main interest is Indonesia's large domestic market, which relatively has a low adoption rate though we're not ruling out export markets like Vietnam and China," Azis said.

Hon Hai Precision Industry Co Ltd (Foxconn) also cooperates with PT Industri Baterai Indonesia (IBC) and Gogoro Inc to develop a comprehensive electric vehicle ecosystem in Indonesia. The giant project ranges from manufacturing electric batteries, including battery cells and battery modules, and industrial development of four-wheeled electric vehicles, two-wheeled electric vehicles, and electric buses.

Cooperation Scope

The scope of cooperation also includes the development of EV supporting industries, consisting of energy storage systems (ESS), battery exchange/swap stations, battery recycling, and research and development (R&D) in the battery and EV fields. With a total investment of US$8 billion, the industry will generate a total market capitalization of more than US$100 billion in Indonesia by 2030.

In the feasibility study, Indika and its partners will look at the project in more detail, including determining the collaboration scheme and development plan. Indika, Foxconn, IBC, and Gogoro will collaborate through a build, operate, and localize (BOL) scheme in Indonesia.

The company hopes to reach the 50 percent target with about US$500 million of investment in the next three years, most going into its existing projects, such as the electric bike brand Alva, which will be launched commercially in August.

Indika invested an additional US$7.5 million in the electric motorcycle business to in subsidiary PT Ilectra Motor Group as a venture company and held for the electric two-wheeled vehicle business. In addition, Alpha JWC and Horizons Ventures signed a convertible loan agreement to Ilectra for US$7.5 million with a share ownership conversion of 21.4 percent in the same month.

INDY produces electric motorcycles through another subsidiary PT Electra Mobilitas Indonesia (EMI), in which Indika owns a 99.99 percent stake, and the remaining 0.0025 belongs to PT Indika Energy Infrastructure. EMI establishment will develop and sell two-wheeled electric vehicles. Indika is also developing a two-wheeled electric vehicle ecosystem, such as charging stations and battery swapping.

Electric Vehicle Market

The electric vehicle market in Indonesia is very potential, both in terms of volume and value. The government targets the population of electric cars to reach 2 million units and electric motorcycles to 13 million units by 2030. To encourage the development of the electric vehicle industry, electric vehicle manufacturers can take advantage of various incentives from the government. The incentives include tax holidays, mini tax holidays, tax allowances, exemption from import duties, government-borne import duties, and super tax deductions for research and development activities.