(Updates with more details)
JAKARTA, Aug 9 (Reuters) - Indonesian President Joko Widodo on Thursday signed a decree laying out government support for electric vehicle (EV) industry in the country, looking to leverage its wealth of essential metals.
The key to the EV industry was in the construction of batteries, and the “raw materials to make a battery: cobalt, manganese and others, we have in this country,” Widodo said in a statement issued by the Cabinet Secretariat.
Indonesia has been seeking to carve out a downstream industry based on its supplies of nickel laterite ore, which is used in lithium batteries.
“The business strategy can be designed in this country so that we can get ahead of others in building an inexpensive electric car industry, which is competitive because the raw materials are here,” Widodo said during an event at the headquarters of the Association of Southeast Asian Nations, according to the statement.
Indonesia aims to become an EV hub for Asia and beyond with a target to start EV production in 2022 and for the share of EV output to reach 20% of total car production by 2025.
Widodo warned building such an industry would take longer than “a year or two”, because it must also create a new market.
New regulations would encourage not only EVs but also hydrogen fuel cell vehicles, covering all the new green technologies in the automotive industry, the industry ministry said in a separate statement.
The government will allow for imports of completely built units (CBU) - entire vehicles - for three years under a quota system as companies prepare for production of greener cars, the ministry said.
But in 2023, all such cars must have a minimum local component mix of 35%, it said.
For cars to get the benefit of low tariffs for Australian exports the minimum local component must reach 40%. Jakarta signed a free trade agreement with Canberra in March, giving Indonesian cars lower tariffs to enter the Australian market.
A draft regulation seen by Reuters ahead of the signing also said automakers would get reductions in import tariffs for EV machinery and materials and lower luxury taxes for buyers, among other things.
“At least three principals (companies) have expressed their commitment to invest in the EV industry,” Industry Minister Airlangga Hartarto said, naming Japanese Toyota Motor Corp as one of them.
Authorities have previously said Toyota, which has the biggest market share in the domestic car market, and Hyundai Motor would invest $2 billion and $880 million in the country, respectively, to develop EVs over the next few years.
Widodo on Thursday also suggested city administrations in Indonesia could provide more incentives, such as free parking or free administrative fees, to further support adoption of EVs. (Reporting by Gayatri Suroyo and Bernadette Christina Munthe Editing by Christian Schmollinger and Richard Pullin)