A well-oiled after-sales service market can speed up Indonesia’s EV transition
Published on October 2, 2023
As Southeast Asia’s single largest market, Indonesia is projected to have 20 million vehicles on its roads daily in the next five years, with the auto service and repair space estimated to reach over US$21 billion. While authorized dealers do offer repairs and servicing to customers, by and large, independent workshops control 80% of Indonesia’s aftermarket.
Meanwhile, it’s no secret that Indonesia is heading into an ambitious energy transition. Electrifying its transportation system has become one of the key ingredients for the country to achieve its net zero goal, especially when vehicles on the streets account for roughly 20% of the nation’s total carbon emissions.
Manufacturing electric vehicles (EVs) is one thing, but laying the groundwork for a solid EV repair and service sector is a different story entirely. In fact, in the context of adoption at scale, I would argue that the existence and accessibility of EV-friendly workshops are equally important compared to other parts of the equation, such as the point-of-sale, financing options, and the ease with which an owner can re-sell their motorbike.
In order to ensure that the growth of EV adoption in Indonesia will not suffer major setbacks, the aftersale market has to advance along with the supply side.
Currently, Indonesia’s 0.2% EV penetration rate is similar to China’s a decade ago, indicating massive growth potential as the country pursues an aggressive energy transition agenda. Today, China has a penetration rate of nearly 20% for electric two-wheelers and 15% for electric four-wheelers.
Vietnam, too, saw its electric two-wheeler penetration grow from 1.5% to 9.7% at a rapid clip, driven by government policies, increased awareness about reduced carbon emissions, and an increased supply by local and Chinese EV manufacturers.
Closing the gap between sales and aftermarket
These numbers show that the next few years will be a critical period for Indonesia’s EV industry, and this puts workshops squarely in the spotlight. They will have to adapt and transform alongside the rapidly growing mobility market — this implies equipment changes across the spectrum, but also personnel upskilling.
At Otoklix, I have observed first-hand how fragmented the automotive service and repair market is in Indonesia, and yet, we have managed to help workshops nationwide address inefficiencies with new tech.
It took only us a few years to achieve meaningful topline growth and positive unit economics in a market that is already estimated to be worth more than US$16 billion — a testament to our fit model and solutions for workshop owners. Looking at how EV adoption is poised to surge in Indonesia, now is the time to blaze a trail by expanding our operation.
Even though EVs generally require less maintenance than internal combustion engine vehicles, there’s still a substantial need for regular servicing and EV-specific services that users need to stay on top of.
Before buying an EV, consumers will always ask where is the nearest repair station. They would then ask what kind of services, how frequent, and at what price is the maintenance for their battery-powered vehicles. As the production of EVs increases in Indonesia, we can no doubt expect to see a response in the form of evolving workshop services.
In the context of EV maintenance, workshop personnel must possess or develop two crucial skills. First, they need a deep understanding of electrical servicing. Even in traditional gas-powered vehicles, the electrical components are among the most complex to service. Grasping how these components connect to the vehicle’s computer unit forms the bedrock of expertise in EV maintenance.
Secondly, technicians should be proficient in using on-board diagnostics, tools that scan a vehicle’s engine to pinpoint potential issues. It’s worth noting that these diagnostics systems for EVs differ from those for traditional vehicles. Our pilot initiative in EV servicing aims to gather sufficient data to create a comprehensive repair manual, which will serve as the basis for the EV-specific on-board diagnostics functions. With this and other resources, we will upskill independent workshops throughout Indonesia.
Integrating these kinds of services and capabilities into existing shops ensures that consumers will be able to enjoy a well-oiled aftermarket for EVs, but it also protects the livelihoods of workshop owners. By educating workshop teams on how to service EVs, they can explore new revenue streams and avoid being left behind as Indonesia charges toward its net zero goal.
Indonesia’s unique edge
Not a lot of people know that 80% of auto service in Indonesia actually relies on some sort of spare part, whether it’s lubricants, tires, belts, batteries, or other components. In this respect, Indonesia holds another ace up its sleeve: its rich nickel reserves, essential for lithium-ion batteries.
Producing over 37% of the world’s nickel and guarding more than 22% of its reserves, this resource offers a unique opportunity for the nation’s independent auto workshops.
With the inevitable rise in EV popularity, battery services and repairs will surge in demand. By partnering with nickel producers, these workshops have the potential to make EV battery maintenance and repair more affordable for Indonesian drivers.
However, Indonesia’s EV adoption journey also requires the smart capital and expertise of global institutions. Best industry practices are usually born out of partnerships, which is evident in the participation of foreign automakers such as Wuling and Hyundai Motor Group in Indonesia’s EV ambitions. Another Chinese carmaker, Neta, is gearing up to establish an EV assembly line in Indonesia next year.
Every product sold requires downstream service and repair support, and this is no different when it comes to EVs. By starting Otoklix’s journey of bringing awareness to workshops across Indonesia, we hope to play a significant role in the nation’s EV journey.
While the Indonesian government is still finalizing various policies to supercharge the country’s energy transition, there is no doubt that EVs are here to stay. The only question, now, is how can we scale the EV industry, not just vertically, but horizontally.
Global investors who tap into the growth of Indonesia’s EV market today, especially its soon-to-boom aftermarket and workshop sector, stand to capture outsized returns and set themselves up for unprecedented prosperity for decades to come.
Martin Reyhan Suryohusudo is the Co-founder and CEO of Otoklix, a tech company backed by AC Ventures that bridges the gap between car owners and Indonesia’s independent auto workshops. It transforms the vehicle maintenance experience for consumers and equips workshops with software solutions and procurement savings.
This story originally appeared on DealStreetAsia