Toyota plans to invest US$2bn for electric vehicle (EV) production in Indonesia over the next five years.

Toyota joins Hyundai, which is also committed to commence the production of EVs in Indonesia by 2022. The investment, which forms part of Toyota's EV strategy to support both the local demand and exports, will help the company to sell 5.5 million EVs globally every year by 2025. The company plans to globally introduce over 60 new electric models during the same period.

Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData, welcomed the move.

"The investment completely makes sense as Toyota is already a market leader in Indonesia both in terms of production and sales, indicating strong manufacturing capabilities and existing supplier network," he said.

Toyota Motors, along with its subsidiaries Daihatsu and Hino, exports over 200,000 units from Indonesia annually. Additionally, the company will benefit from the government's efforts to bring in investments and create local EV manufacturing ecosystem. The government itself has entered thee EV battery manufacturing to bring down battery costs.

"It is important to note that Indonesia's EV targets are not on track and the domestic market presently has very weak appetite for EVs, especially in the passenger car segment," adds Agwan. "As a result, the government has set an ambitious target of 20% of vehicle production to comprise electric and hybrid vehicles by 2025.

"However, the country's economy has been significantly impacted by the COVID-19 pandemic due to shrinking government budget and spending. The high cost of hybrids and BEVs also refrains customers from opting EVs and thus Toyota may need to put major focus on the export front.

Agwan believes that Toyota, in coordination with Indonesia's government may change the EV game in Indonesia.

"Even though Indonesia presently lags behind other countries in the region in terms of EV development, the availability of raw materials such as cobalt, zinc, manganese and nickel ore in abundance offers vast opportunities for local EV battery and related component development, which can in turn boost local EV production as well as sales," he concludes.

See also: Hyundai to produce EVs in Indonesia by 2022