Indonesia to Offer Tax Incentives for EV Automakers

Indonesia will grant tax breaks to automakers planning to build electric vehicle factories on imports of fully assembled electric vehicles by 2025, according to a new presidential decree, as Jakarta attracts more cash. According to the new laws, signed last December 8 and announced this week, companies that have invested in electric vehicle factories and those that are thinking of increasing or planning to invest in electric vehicles will be able to obtain incentives. 

The new laws will eliminate import taxes and luxury sales taxes on assembled vehicles imported into the country and provide incentives for taxes collected by local governments. Previous laws provided these incentives for importing used vehicles that were shipped as parts and assembled to the country of sale. Indonesia is the largest car market in Southeast Asia.

However, the number of vehicles the company can import depends on the size of its investment and the development progress of its factory, which the Ministry of Investment must approve. Rachmat Kaimuddin, the deputy minister of integration at the  Ministry of Investment and the Pacific, said during a webinar on Indonesia and the economic outlook on Dec 13 that the new law will help carmakers build the Indonesian market through electric vehicle 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) material and can create the supply chain," he said.

The new regulations also delayed a deadline requiring companies to produce at least 40 percent of the content of EVs in Indonesia until 2026 from 2023. Also, the decree delays an increase in the local content threshold to 60 per cent to 2027 from the initial target of 2024.