Indonesia Poised to Become New Car-making Centre

Indonesia is trying to position itself as a new centre for electronic vehicle production, and car-making giants such as Volkswagen are keen to take advantage. As we reported last week, there are signs that Indonesia is well positioned to make trade gains that have been lost by China.

The EU and Indonesia are pushing to complete a free trade agreement by the end of the year, as the latter prepares to boost its electric vehicles (EV) industry. Time is of the essence, as elections in 2024 will see the departure of President Widodo as well as European Commission President Ursula von der Leyen, a strong proponent of free trade deal in Southeast Asia.

Instead of shipping its mineral wealth of nickel, bauxite and aluminium to China and other foreign countries, Indonesia now intends to build an end-to-end EV supply chain on its own shores and ratchet its economy up the supply chain.

In doing so, the country is also positioning itself as an alternative for international brands against China.

The strategy seems to be yielding results. Last month, Indonesia’s Investment Minister Bahlil Lahadalia revealed that German carmaker Volkswagen intends to build an EV battery ecosystem in Indonesia.

The announcement was made at the Hanover trade fair, where German Chancellor Olaf Scholz met with Indonesia’s President Joko Widodo. At the time, Scholz told Widodo that he was “working to finally get this agreement across the finish line.”

And as Europe seeks to deepen ties, rivals from the US are on the move too. Ford, the US-based car making giant, has already partnered with several active firms in Indonesia, while Tesla, the world’s leader in EVs, is in talks with the Indonesian government.

Numerous politicians from Europe and Indonesia have asserted that they intend to finalize the EU FTA talks by the end of this year.

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