13-12-2023 (JAKARTA) In a bid to attract more investment and promote the development of the electric vehicle (EV) industry, Indonesia will provide tax incentives to automakers planning to establish EV plants, according to a new presidential regulation.
The regulation, signed on December 8 and released this week, states that companies that have already invested in EV plants, plan to increase their investments in EVs, or have intentions to invest will be eligible for the incentives.
Under the new rules, import duties and luxury-goods sales tax on completely built-up EVs brought into the country will be waived. Additionally, the regulation provides incentives on taxes collected by provincial governments.
Previously, these incentives were only applicable to imports of knocked-down vehicles, which are delivered in parts and assembled in the country where they are sold. Indonesia is the largest automotive market in Southeast Asia.
However, the number of vehicles that companies can import will depend on the size of their investment and the progress of their plant’s development. Approval from the investment ministry will be required.
During a webinar on Indonesia’s economic prospects, Rachmat Kaimuddin, a deputy at the Coordinating Ministry of Investment and Maritime Affairs, stated that the new decree aims to support automakers in establishing their market presence in Indonesia through EV imports.
“We try to be progressive because once we have created an EV industry in Indonesia, the battery industry will also come, and we already have the raw materials and can create the supply chain,” Kaimuddin explained.
The new regulations also include a delay in the deadline requiring companies to produce at least 40% of the content of EVs in Indonesia. The deadline has been pushed from 2023 to 2026. Additionally, the decree postpones the increase in the local content threshold to 60% from the initial target of 2024 to 2027.
Indonesia has set an ambitious target of producing around 600,000 EVs by 2030, surpassing the number of EVs sold in the country in the first half of 2023 by over 100 times.
Several companies, including Hyundai, have already made investments in Indonesia, accompanied by investment commitments from China’s Neta EV brand and Mitsubishi Motors. The Indonesian government is also actively courting Tesla and China’s BYD.
