In a bid to attract increased investment in the electric vehicle (EV) sector, Indonesia has announced new regulations offering tax incentives to automakers planning to establish EV plants. The presidential regulation, signed on December 8 and disclosed this week, extends tax benefits to companies already invested in EV manufacturing, those planning to enhance their EV investments, or those intending to make new investments in the sector.
The updated rules specifically waive import duties and luxury-goods sales tax on completely built-up EVs imported into the country. Unlike previous regulations, which applied incentives solely to imports of knocked-down vehicles assembled within the country, the latest measures are designed to encourage the import of fully assembled EVs. Indonesia, as Southeast Asia's largest auto market, aims to bolster its position in the growing electric vehicle industry.
The number of vehicles eligible for import under these incentives will be contingent on the size of the investment and the development progress of the respective plants. Approval from the investment ministry is mandatory for companies seeking to benefit from these incentives.
During a webinar discussing Indonesia's economic prospects, Rachmat Kaimuddin, a deputy at the Coordinating Ministry of Investment and Maritime Affairs, emphasized that the new decree aims to facilitate the growth of the EV market in Indonesia. Kaimuddin stated, “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) material and can create the supply chain.”
Additionally, the regulations extend the deadline for companies to achieve at least 40% local content in EVs from 2023 to 2026. The target for a 60% local content threshold has been postponed to 2027 from the initially set deadline of 2024.
Indonesia's ambitious goal is to produce around 600,000 electric vehicles by 2030, a significant increase from the relatively modest number of EVs sold in the country during the first half of 2023. Notable investments have already been made by companies such as Hyundai, while China's Neta EV brand and Mitsubishi Motors have also committed to the Indonesian market. Furthermore, efforts are being made to attract major players like Tesla and China's BYD to contribute to the country's burgeoning electric vehicle industry.