Why Toyota is investing $2 billion to develop electric vehicles in Indonesia

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Toyota will bolster its electric efforts by investing 28.3 trillion rupiahs ($2 billion) to develop electric vehicles (EVs) in Indonesia over the next four years, according to Reuters. The investment will initially focus on developing hybrid vehicles and eventually transition to developing full EVs, though Toyota did not provide specific details.

Here's why we think Toyota chose Indonesia as an EV development site:

• Indonesia is a major producer of a core element for EV batteries. The country is home to large reserves of nickel laterite ore, a key ingredient in the lithium-ion batteries that power EVs. Toyota currently has the capacity to produce batteries for around 28,000 EVs, or 1.5 million hybrid cars, per year, according to Gerald Killmann, Toyota's VP of R&D for Europe, as cited by Car and Driver. The Japanese automaker will soon need to up its capacity - and likely its access to resources - as it's planning to launch six new EV models starting in 2020.

• The country is a hotbed of EV activity, and Toyota could benefit from economies of scale. Other automakers, including Mitsubishi and Hyundai are also investing in Indonesia. Working in proximity to other automakers pursuing EV tech will lead to supply chain and infrastructure efficiencies than can drive down costs for components, such as batteries: The average global cost to manufacture lithium-ion batteries in 2018 was about $175 per kWh, $50 per kWh higher than the price needed to make EVs cheaper to own than a gas-powered vehicle, according to the US Department of Energy. Additionally, Toyota is already well established in the country, with multiple production facilities and existing supply chains.

• Consumers in Indonesia and the greater Southeast Asian region have shown interest in purchasing EVs.Toyota's EV facilities could provide easy access to a market with an appetite for the cars. A Nissan survey of EV attitudes in the region showed that over one-third (37%) of consumers in Singapore, Indonesia, Thailand, Malaysia, Vietnam, and the Philippines are open to buying an EV. Interest is even higher (41%) among Indonesian consumers.

The bigger picture: Toyota's investment in Indonesia will help the company meet its EV sales goals and enable it to claim a large share of the exploding EV market.

Toyota is quickly closing in on the timeline for its ambitious EV goals, so the company is looking for ways to expedite its efforts. In 2017, Toyota revised its goal of having EVs account for half of its auto sales by 2030 - it now aims to reach that level by 2025.

s Toyota gears up to launch the first of its new lineup of EVs, a dedicated EV facility that provides access to a wealth of required natural resources could prove to boost its manufacturing plans and get more cars in the hands of drivers. If successful, Toyota will be able to cement its position in the burgeoning EV market - the global fleet of EVs will reach 130 million by 2030, up from just over 5 million in 2018, according to the International Energy Agency.

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