Indonesia Boosts EV Market with New Investment Incentives and Regulations

Summary

  • A new regulation has been signed for companies investing in Electric Vehicle (EV) plants in Indonesia, which would make them eligible for incentives.
  • The regulation will eliminate import duties and luxury-goods sales tax on vehicles brought into Indonesia.
  • These incentives previously only applied to knocked-down vehicles; now it applies to all imported EVs.
  • The number of vehicles a company can import will be dependent on investment size and plant progress.
  • This new regulation should help automakers expand their market and attract investment, with Hyundai, Neta EV and Mitsubishi Motors already invested.
  • The deadline for companies to produce 40% of EV content in Indonesia has been extended from 2023 to 2026.
  • The deadline for increasing local content threshold to 60% has been pushed to 2027 from the initial target of 2024.
  • These changes support Indonesia’s aim to manufacture 600,000 EVs by 2030.

New Regulation for Incentives on EV Investment

The latest regulation signed on Dec. 8 encourages companies investing or planning to invest in EV plants, to expand their investments. Such firms will now be eligible for incentives.

Import Duties and Tax Incentives

Companies benefitting from this regulation, will no longer need to pay import duties and luxury sales tax on imported built-up vehicles. In addition, they can expect incentives on provincial taxes.

Import and Investment Terms

There will be a limit on how many vehicles a company can import, determined by the size of the investment and plant progress. Approval by the investment ministry is mandatory.

The Impact of New Regulations

Rachmat Kaimuddin, a deputy at the Coordinating Ministry of Investment and Maritime Affairs, stated in a webinar that this decree will help automakers expand their market through EV imports.

Deadlines Extended

The enforced stipulations for companies to manufacture at least 40% of EV content in Indonesia by 2023, and to increase local content threshold to 60% by 2024, have now been delayed to 2026 and 2027 respectively.

Indonesia’s Vision for EV Production

Indonesia aims to produce 600,000 EVs by 2030, a substantial increase from the number of EVs sold in the first half of 2023.

Existing and Prospective Investors

Several companies like Hyundai, Neta EV and Mitsubishi Motors have already invested in Indonesia. The country is also actively courting Tesla and China’s BYD.

In light of these changes, investors in the financial and trading sectors should monitor the performance of companies like Tesla, Hyundai, and Mitsubishi Motors, as well as the Indonesian currency and its potential impact on forex markets.

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