EV ecosystem: Competitive incentive to attract EV
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Ekosistem EV: Insentif apik Tarik kendaraan listrik
22 February 2023
By: Nyoman Ary Wahyudi and Lili Sunardi
Jakarta - The government is implementing various efforts, including increasing the population of electric vehicles in Indonesia, to ensure the downstreaming of mineral resources, which is Indonesia’s wealth, into electric vehicle (EV) batteries.
After taking a firm stance on the downstreaming of mineral resources that are the raw material for EV batteries, the government is now making sure that Indonesia has an attractive market so that investors will want to build their facilities in the country.
The government’s effort to increase EV population in the country is boosted by several incentives that have been prepared. Moreover, Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan ensures that the electric vehicle incentives that have been prepared will be more competitive compared to several other countries in Asean, such as Thailand and Vietnam.
The government is planning to provide additional incentives that are not offered by Thailand to boost investment and domestic EV use, such as the value-added tax (VAT) reduction from 11% to 1%.
Besides that, there are subsidies of Rp7 million per unit for electric motorcycle purchases and Rp5 million for conventional motorcycle conversion to electric power.
The abundance of EV population in Indonesia is expected to boost nickel and bauxite downstreaming into the most downstream product, an EV battery.
Until now, the less than competitive market has been making the government worried about the downstreaming of nickel, bauxite, and copper as they only reach the precursor level. Hence, Indonesia has yet to optimally benefit as the commodities still need to be exported to be processed into EV batteries overseas.
Investment and Mining Deputy of the Coordinating Ministry for Maritime Affairs and Investment Septian Hario Seto said that the government was also considering reducing the import duty for completely built-up (CBU) EVs.
“Permits for CBUs can be provided if they are committed to investing in domestic factories. So, they can import CBUs during the factory construction period,” he said on Tuesday (21/2).
Meanwhile, Institute for Essential Services Reform (IESR) reported that EV adoption in Indonesia was relatively lower compared to the total sales of conventional vehicles every year.
IESR Director Fabby Tumiwa said that the low EV adoption in the country was caused by the high initial purchase price.
Fabby is asking the government to provide attractive incentives to support the transition from conventional vehicles to electric power.
“The cause for the low electric vehicle adoption in Indonesia is the high initial purchase price,” Fabby said in 2023 Indonesia Electric Vehicle Outlook (IEVO) report.
Besides the high purchase price, Fabby said that the low EV adoption was caused by the lack of charging infrastructure in Indonesia.
Securing raw materials
In another development, West Australia Government and Indonesia Chamber of Commerce and Industry (Kadin) signed an MoU to explore a partnership opportunity on critical minerals to sustain the battery and EV industries.
The MoU was signed in Perth in West Australia on Tuesday (21/2) to follow up the commitment made during B20 and G20 summits in Bali in November 2022.
Kadin Chairperson Arsjad Rasjid said that the partnership on critical mineral supply chain would increase the bargaining power of both countries in the development of the global electric vehicle ecosystem.
Australia is the main supplier of lithium that is a main component in electric batteries. Meanwhile, Indonesia is known as the main producer of nickel ore that is the core component of electric batteries.
“We have to take advantage of this opportunity to develop battery manufacturing factories in Indonesia by utilising Australia’s lithium and beneficial investment to realise the potential of the nickel reserves,” Arsjad said.
In this cooperation, Kadin and West Australia Government will establish an industrial partnership on crucial mineral supply chain in both regions and share information on law and regulation updates.
