Indonesia to Provide Tax Incentives for Electric Vehicle Manufacturers

Jan 2024

Indonesia plans to provide tax incentives for automakers intending to establish electric vehicle (EV) plants, including exemptions on import duties for fully manufactured EVs until 2025. This effort, announced in a recent presidential decree, seeks to attract further investment to the Southeast Asian country.

Under the new regulations, import and luxury sales taxes on fully assembled vehicles brought into the country will be waived, with additional incentives involving taxes collected by local governments. Previous laws granted such benefits for knocked-down vehicles, delivered in parts and assembled in Indonesia, the largest car market in Southeast Asia.

The number of automobiles that a company can import is determined by its investment size and the progress of its factory development, subject to approval by the Ministry of Investment. During a webinar on Indonesia’s economic outlook, the Deputy Minister of Integration from the Ministry of Investment stated that the new law will encourage automakers to tap into the Indonesian market through EV imports.

Furthermore, the deputy minister underscored Indonesia’s strong position, stating that the expansion of the EV sector will open the way for the development of the battery industry. In effect, Indonesia is well-positioned to build a robust supply chain since it has the necessary raw resources.

In addition to the tax incentives, the recent regulations also extend deadlines for meeting content requirements in EV production. The requirement for companies to produce at least 40% of EV content in Indonesia has been extended to 2026 from the initial target of 2023. Similarly, the local content threshold increase to 60% has been deferred to 2027 from the original goal of 2024.

(Source: Asia Business Outlook)

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