Indonesia unveils EV subsidies for consumers and manufacturers. Here’s a breakdown

• EV subsidies will cover 200,000 electric motorcycles and 35,900 electric cars in Indonesia this year.
• A US$450 cash subsidy will be given to each person who buys a new electric bike made in Indonesia from March 20.
• Subsidy for electric car purchases varies depending on the type and model of the vehicle.

As Indonesia looks to transform itself into a global EV hub, it has been working to balance promoting domestic development and attracting foreign investment. At the same time, the country, like most of its regional peers, is taking measures to improve electric vehicle affordability while aligning its green industrial policies with global trading rules.

The largest economy in Southeast Asia has even committed to producing 13 million electric motorcycles and 2.2 million electric cars by 2030. To top it off, Indonesia has an abundant natural supply of nickel, with up to 52% of the world’s nickel resources. In short, the country is a vital asset in the global battery production supply chain.

President Joko Widodo has set out a vision of building an end-to-end EV supply chain onshore by offering potential investors access to Indonesia’s reserves of critical battery metals and its more than 270 million consumers. The plan seems to be taking shape as global EV and battery producers begin planning billions of dollars of investment.

For context, China’s top battery producer, Contemporary Amperex Technology Co Ltd’, is partnering with local state-owned groups to build a US$5.97 billion mining-to-batteries complex. Even South Korean carmaker, Hyundai, opened its first full-scale EV factory in Southeast Asia. That plant is also capable of building battery EVs.

Indonesia has more for EV consumers and manufacturers

In December 2022, Indonesia’s Minister of Industry, Agus Gumiwang, announced the government’s plan to provide purchase subsidies for buyers of electric cars, hybrid cars, and electric motorbikes. The subsidies would also cover the cost of converting combustion-engine motorbikes to electric. 

This week, Indonesia took a step forward to boost its EV market by announcing a subsidy program for electric scooters, vehicles, and buses. The latest round of subsidies will cover 200,000 electric motorcycles and 35,900 electric cars this year, Luhut Binsar Pandjaitan, the coordinating minister for Maritime Affairs and Investment, told a press conference in Jakarta.

It includes a US$450 cash subsidy that will be given to each person who buys a new electric motorcycle made in Indonesia from March 20, Luhut said. The subsidy, which comes in the form of tax deductions, is an effort to encourage increased sales and production of electric motorcycles in Indonesia. 

As for electric car purchases, the subsidy amount will vary depending on the type and model of the vehicle. “Currently, other countries, our neighbors, encourage EV adoption with various incentives. We use the term government assistance. They use massive state funds to make investments in the electric vehicle industry in Indonesia attractive,” he told reporters. 

The latest announcement came on the heels of reports that Chinese automaker BYD Group and US EV maker Tesla are finalizing agreements to invest in domestic EV production facilities in Indonesia. “We are finalizing negotiations with two big global car producers. We hope this new policy will make our position much stronger than before,” Luhut said without naming the companies.

“If we don’t give (incentives), they will not come to us,” he added. When asked about the discussion with Tesla, Luhut said he plans to talk with the US carmaker in the coming days. Separately, Germany’s BASF and French mining firm Eramet is finalizing a US$2.6 billion partnership deal to invest in a nickel smelting facility in Indonesia. The project will make materials to be used in batteries for EVs.

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