Indonesia’s Shift to EVs: The Fate of Government Vehicles

Three years ago, President Joko Widodo signed Presidential Instruction on the Use of Battery Electric Vehicles as Operational Service Vehicles for Central and Regional Government Agencies.

Three years ago, President Joko Widodo signed Presidential Instruction No. 7 of 2022 on the Use of Battery Electric Vehicles as Operational Service Vehicles and/or Individual Service Vehicles for Central and Regional Government Agencies. This instruction essentially directs all ministries, agencies, and local governments to immediately prepare the necessary infrastructure for transitioning from fossil-fuel-powered official vehicles to electric vehicles.

One ministry that has started this transition is the Ministry of State-Owned Enterprises (SOE), which recently launched the use of electric cars as service vehicles for Ministry of SOE’s high-ranking officials. This initiative aims to build and electric vehicle ecosystem, promote energy transition, and reduce fuel consumption. According to Minister Erick Thohir, the use of electric vehicles (EVs) can significantly reduce budget expenditures, particularly on fuel costs, which is estimated could drop by up to 60%.

This policy aligns with the government’s commitment to implement green economy and be the leader for the renewable and clean energy sector, walking on its path to the Net-Zero Emissions (NZE) Roadmap by 2060. However, one aspect that seems to have been overlooked is the fate of conventional government cars–will they remain government assets, be publicly auctioned, or be disposed of?

Leaving conventional service vehicles parked in government offices is the most pragmatic decision during this transition period. The primary reason is that the use of EVs is still optional and not yet mandated by regulation, making leasing a more prudent alternative for the relevant agencies. This avoids the necessity for large-scale procurement and listing them as fixed assets on the balance sheets. Thus, if the EV lease period expires or the policy becomes unpopular, they can revert to the original policy without difficulty.

However, unused assets still incur costs. Regular maintenance expenditures and fuel consumption cannot be ignored. Motor vehicles should not be left idle for too long; at the very least, engines must be started periodically and vehicles used regularly. Like muscle mass that atrophies from disuse, vehicles also deteriorate significantly without regular use, leading to increased maintenace costs. Instead of achieving efficiency, it results in cross-subsidization.

The second option is auctioning. Government auctions are common, particularly for official vehicles that have reached the end of their useful life (five years). From the government’s perspective, this option offers several benefits: a) removing unused State-Owned Assets; b) reducing maintenance and fuel expenses; c) contributing to the state treasury through Non-Tax State Revenues from auction proceeds; and d) demonstrating a strong commitment of using EV as an example to the public.

Auctioning conventional vehicles can be done, but it must be noted that replacement EVs should be purchased, not leased. If the old vehicles are successfully auctioned while the replacements are still leased, the government loses flexibility in their use. As officially vehicles are maximally utilized to support the government’s endless operational activities. This certainly concerns EV leasing companies, leading them to draft very strict leasing agreements, limiting the government’s operational freedom.

From the public’s perspective, auctions are eagerly awaited by those planning to buy well-maintained used cars at reasonable prices. As we know, the auction price of official vehicles is generally cheaper than what market offers for used cars, including used electric cars (despite the EV tax incentive policy). Here, the principle of getting maximum results with minimal sacrifice applies. Consequently, when faced with two choices–buying subsidized electric vehicles or reasonably priced used conventional vehicles, be they ex-officials or not–we already know the answer. Not to mention considering the availability of fuel stations, spare parts, routine service costs, taxes, and other expenses.

The final option is to dispose unused official vehicles by scrapping them, which almost impossible. There is no strong reason for government to do this; it is considered inefficient–bought at high price, with high maintenamce costs, and no financial benefit from auction proceeds. Scrapping relatively young conventional vehicles in favor of EVs would only show the public that the government is wasteful, whereas the budget could be allocated for government programs with broader impacts that the public needs most: education, health, and welfare.

The government has noble intentions by demonstrating its commitment to reducing air pollution and inspiring the public to do the same. However, a new problem arises: the increasing number of vehicles correlating with traffic congestion. It is worth questioning whether the government has seriously considered the impact of this policy, not only on the environmental aspect but also on the comfort and efficiency of urban mobility, which are equally important.

For example, according to data from the Indonesian Central Agency of Statistics, the number of passenger cars in Jakarta Provine in 2022 reached 3.7 million units, with an annual increase of approximately 250,000 units. This does not include all types of vehicles, totaling almost 22 million units in the same period. This vehicle explosion recently places Jakarta’s congestion level in the ninth position out of 200 major cities worldwide in the 2024 Traffic Index. Without the government’s awareness to view this issues multidimentionally, the policy of transitioning to EVs will significantly impact the volume of vehicles on the roads. Remember, the above data only includes registered vehicles in Jakarta, not mentioning that capital workers reside in surrounding satellite areas such Bogor, Depok, Tangerang, and Bekasi. This situation makes the actual number on the ground much higher than presented.

Indeed, several countries have succesfully transitioned form conventional to electric vehicles; Norway, Iceland, Sweden, the Netherlands, and China. They should serve as examples for Indonesia. However, it should be highlighted also that these are developed countries with decent public transportation systems, pedestrian-oriented infrastructures, integrated public mobility, and citizens who also have collective awareness to prioritize public transportation for the common good.

For these success stories, the Indonesian government should first focus on strategies to reduce vehicle volume and congestion in large cities before hastily implementing EV policies as official vehicles. Some actions the government can take include optimizing the existing public transportation system, comprehensively expanding its network to suburban areas, building city infrastructure oriented towards pedestrians, tightening the use of private cars, and most importantly establishing people’s awareness of using public transportation for the sake of environmental, social, and economic sustainability.

Rifky Pratama Wicaksono
Rifky Pratama Wicaksono
Rifky Pratama Wicaksono is a Policy Technical Reviewer at the Audit Board of Indonesia. His interests include public policy, economy, public finance, and governance.The views expressed belong solely to the author.