Indonesia’s EV Incentives Should Strengthen Domestic Industry, Analyst Says

JAKARTA, Jakartaweekly.com — Analysts have welcomed the government’s plan to introduce new incentives for battery electric vehicles (BEVs). However, they stressed that the policy should serve as a catalyst for the development of Indonesia’s domestic electric vehicle industry.

Tri Yuswidjajanto, a professor at the Bandung Institute of Technology (ITB), said the upcoming incentive package should not be aimed solely at boosting the adoption of non-fossil-fuel vehicles in the domestic market.

“The incentive program should also be used as momentum to accelerate the development of Indonesia’s domestic electric vehicle manufacturing industry,” he told Jakarta Weekly on Wednesday, June 17, 2026.

According to Tri, electric vehicle incentives have the potential to deliver benefits far beyond increasing sales or vehicle adoption. The policy could help reduce air pollution, lower fuel consumption, and decrease Indonesia’s dependence on crude oil imports.

He argued that incentives could encourage more consumers to switch from internal combustion engine (ICE) vehicles to electric vehicles, particularly as EV operating costs are significantly lower than those of conventional vehicles.

“With electric vehicle incentives in place, more people are expected to transition to electric vehicles,” he said.

Tri explained that the operating costs of electric vehicles can be around 50 percent lower than those of fossil-fuel-powered vehicles. In addition, EVs are more energy-efficient and contain fewer mechanical components, resulting in relatively lower maintenance costs.

The debate over electric vehicle incentives has resurfaced amid rising Pertamax fuel prices in June 2026.

Previously, Finance Minister Purbaya Yudhi Sadewa had targeted the launch of a new incentive scheme in June 2026. However, the policy has yet to be issued.

Purbaya said incentives for electric cars and motorcycles are part of the government’s broader effort to reduce fuel consumption. Under the proposed scheme, electric motorcycles would receive subsidies of Rp5 million per unit for up to 100,000 vehicles.

Electric cars, meanwhile, would be eligible for government-borne value-added tax (VAT) incentives ranging from 40 percent to 100 percent, depending on the type of battery used, also covering a maximum of 100,000 vehicles.

In May 2026, the government said it was still assessing the fiscal impact of the program. By early June, Industry Minister Agus Gumiwang Kartasasmita stated that the Ministry of Industry and relevant agencies were still finalizing discussions on incentives for electric cars and motorcycles.

According to Agus, the incentives are intended not only to accelerate EV adoption but also to support the development of industries based on domestic resources.

Indonesia holds one of the world’s largest nickel reserves, a key raw material for electric vehicle batteries. As a result, strengthening the EV ecosystem has become one of the government’s strategic priorities.

Calls for new incentives have also emerged as the electric vehicle market begins to show signs of slowing. Data from the Association of Indonesian Automotive Industries (GAIKINDO) showed that BEV sales declined from 14,815 units in April to 9,290 units in May 2026.

This came despite overall national vehicle sales growing 14 percent year-on-year in May 2026, rising from 60,697 units to 69,219 units.

The best-selling electric vehicle during the period was the Jaecoo J5, with wholesale sales of 2,943 units. It was followed by the Geely EX2 with 1,395 units and the Wuling Eksion with 535 units. Meanwhile, the BYD Sealion ranked sixth, recording sales of 258 units throughout May.

The slowdown followed the government’s decision to end its zero-import-duty incentive for electric vehicles at the end of 2025. The policy was stipulated under Finance Ministry Regulation (PMK) No. 62 of 2025.

Effective January 1, 2026, imported electric vehicles became subject to a 50 percent import duty, a 15 percent luxury goods sales tax (PPnBM), and an 11 percent value-added tax (VAT).

The government had previously introduced import incentives to attract EV investment into Indonesia while accelerating market adoption. However, policymakers later concluded that Indonesia needed to reduce its reliance on completely built-up (CBU) imports and strengthen domestic manufacturing capabilities.

The removal of incentives was therefore intended to encourage automakers to establish production facilities in Indonesia and increase local content requirements (TKDN).

Coordinating Minister for Economic Affairs Airlangga Hartarto said the incentives would not be extended because the government plans to redirect the budget toward a national car program.

Against this backdrop, the Institute for Essential Services Reform (IESR) has emphasized the importance of maintaining the momentum of EV adoption. In December last year, the organization warned that removing incentives could drive up EV prices, weaken sales, and slow the growth of the battery and component industries.

According to IESR, stronger demand for electric vehicles could stimulate the growth of supporting industries, including battery manufacturing. With a fully integrated battery industry spanning upstream to downstream activities, Indonesia could potentially generate cumulative economic benefits of around Rp544 trillion annually by 2026.

IESR Chief Executive Officer Fabby Tumiwa said wider EV adoption could also strengthen national energy security. Based on the institute’s analysis, an electric car driven 20,000 kilometers per year could reduce fuel imports by up to 1,320 liters and save users approximately Rp6.89 million in operating costs annually.

Fabby urged the government to implement a consistent long-term policy strategy while gradually rationalizing fuel subsidies. In his view, fuel subsidies have long undermined the competitiveness of electric vehicles in Indonesia.