Welcoming Indonesia’s EV Incentives Plan
Key Takeaways:
• The government plans to finalize its subsidy schemes amounting ~IDR8mn (~USD515) for 2W EV, ~IDR5mn (~USD320) for 2W conventional convert to EV, ~IDR80mn (~USD5.2k) for BEV, and ~IDR40mn (USD2.6k) for hybrid cars.
• Govt plans to subsidize sales of EV cars and motorbikes so that they become more affordable. Assuming that an electric motorcycle costs IDR25-30mn (USD1.6k-1.9k), the planned purchase subsidy of IDR8mn per unit would reduce the cost of an electric motorcycle to less than the price of a comparable fuel-powered motorcycle, which generally cost around IDR17-22mn, thus making them affordable.
• Indonesia sets target at least 1.2mn and 25k EV bikes and cars, respectively in FY24F. The last data mentions, EV bikes and cars were each recorded 54k/7.90k units or reaching 4.58%/31.59% of the government's initial target.
• We remain Overweight on the automotive sector given: a) EV sales incentives, b) increased use of domestic components, and c) huge investment in EV development in Indonesia. Our top picks in the sector are ASII IJ (BUY; TP: IDR6,400) and AUTO IJ (BUY; TP:IDR1,700) as currently, the stock is trading slightly below -1STD (5-yrs avg) with PE ratio at 8.37x/6.93x level. Downside risks: USD/IDR rate, rising inflation and interest rates, and semiconductor chip shortage.
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