In a bid to become the region’s focal point for electric vehicle (EV) production, Indonesia is reportedly set to announce a broad-ranging EV policy that will offer tax cuts to EV battery producers and foreign automakers, Reuters reports.

Last week, deputy minister for industry Harjanto said that Indonesia is encouraging companies and investors in Japan and Korea to get into the electric vehicle business in Indonesia at all levels. “The lower the electric vehicle’s carbon emission, the lower the tax will be. Our target is for 20% of all cars produced in Indonesia to be electric vehicles by 2025,” Harjanto said, adding that there has been discussions with Japanese and Korean automakers.

He declined to name the companies that had been engaged in talks, but Hyundai looks to be one of those. In December last year, it was reported that the Korean automaker is planning to invest US$880 million (RM3.6 billion) to produce EVs in Indonesia. In late 2017, Mitsubishi Motors had announced it was set to work with the Indonesian government to research EV infrastructure in the country. Although EVs were not mentioned, Volkswagen and Renault are also planning local assembly in the republic.

The country – which is the second largest car production hub in ASEAN after Thailand – is also aiming to work out preferential tariff agreements with other countries that have a high EV demand, Harjanto said. Alongside this is a concerted effort to also be become a lithium battery manufacturing hub in the region, in direct competition with Malaysia – which also announced such plans recently – to see which will be first to the tape.

Harjanto said construction on an ambitious US$4 billion (RM16.3 billion) lithium battery plant on the island of Sulawesi will be finished in 16 months. The Morowali site currently has 20 nickel ore processing facilities that feed 1.5 million tonnes of nickel pig iron a year into a three-million tonne-per-year stainless steel mill.

The report adds that Indonesia has plentiful reserves of nickel laterite ore, a vital ingredient in the manufacture of lithium-ion batteries, and government authorities are looking for the country to tap into those reserves to become a major regional player in lithium battery production.