In a strategic move to bolster investments in the electric vehicle (EV) sector, Indonesia has introduced a range of tax incentives, unveiling its commitment to becoming a significant player in the global EV market. The recent presidential regulation, signed on December 8 and made public this week, is a signal of Jakarta's proactive approach to attracting substantial investments into the burgeoning EV industry.
Under the new regulations, automakers with plans to establish EV manufacturing plants in Indonesia, those looking to expand their existing EV investments, or those considering fresh investments in this sector will be entitled to tax incentives on imports of completely built-up EVs until 2025. This represents a notable shift from previous regulations that exclusively extended such incentives to imports of partially assembled vehicles, which were then assembled in the country. As Southeast Asia's largest automobile market, Indonesia is keen to capitalize on the global shift towards electric mobility.
Key Highlights of the New Incentives:
- Waiver of Import Duties and Luxury-Goods Sales Tax: The latest regulations grant exemptions from import duties and luxury-goods sales taxes on fully assembled EVs imported into Indonesia. These exemptions are exclusively available to companies that meet specific investment criteria.
- Approval Based on Investment Magnitude and Progress: The quantity of vehicles eligible for import will be contingent upon the scale of investment and the developmental progress of the EV manufacturing facility. The approval process for these imports will be overseen by the investment ministry, ensuring that the incentives align with significant investments in Indonesia's burgeoning EV sector.
During a recent webinar focused on Indonesia's economic prospects, Rachmat Kaimuddin, a deputy at the Coordinating Ministry of Investment and Maritime Affairs, emphasized the forward-thinking nature of these policy changes. He articulated that the new decree aims to facilitate automakers in building a strong presence in Indonesia through the importation of EVs. Kaimuddin expressed optimism that this approach would pave the way for the establishment of a robust EV industry, potentially catalyzing the development of a local battery industry and a comprehensive supply chain.
In addition to these measures, the updated regulations have also extended certain deadlines related to local content requirements. The requirement for companies to produce a minimum of 40% of the content of EVs in Indonesia has been deferred from 2023 to 2026, while the target for increasing the local content threshold to 60% has been pushed back from 2024 to 2027.
Indonesia has set an ambitious target of producing around 600,000 EVs by 2030, marking a substantial increase compared to the relatively modest number of EVs sold in the country during the first half of 2023.
Several automotive companies, including Hyundai, China's Neta EV brand, and Mitsubishi Motors, have already made investments in Indonesia. Furthermore, the nation is actively pursuing the interest of global giants such as Tesla and China's BYD, underscoring its commitment to positioning itself as a significant contender in the global EV landscape.
Indonesia's proactive stance in incentivizing EV investments reflects its determination to embrace sustainable mobility solutions and seize the opportunities presented by the evolving automotive industry. With these regulatory changes in effect, Indonesia is poised to accelerate its journey towards becoming a prominent hub for electric vehicles in Southeast Asia.