Incentives for Electric Vehicles Kickstarts in March

23 Feb 2023

The much-anticipated financial incentives for the purchase of electric vehicles are to start in March of this year, as announced after a coordination meeting between the Ministry of Transportation, the Coordinating Ministry for Maritime Affairs and Investment, and the Ministry of Energy and Mineral Resources on Monday, February 20, 2023.  


For the new purchase of electric motorbikes, consumers will receive a subsidy of Rp 7 million (US$461.83). As for electric cars, there will be a 10% value-added tax (VAT) reduction. This means that electric car buyers will only need to pay 1% of the total VAT at the time of purchase. The provisions covering these incentives will be regulated in an upcoming Minister of Finance Regulation (Peraturan Menteri Keuangan/PMK) slated to be published in March 2023. 


The upcoming incentive also applies to the conversion of ICE (internal combustion engine) motorbikes into electric motorbikes – a program that the Indonesian government has also been campaigning for. Under this program, the Indonesian government has set a target of 50,000 converted motorbikes by 2023. This means that at least up to Rp 350 billion would be spent to meet the target. To further help achieve this goal, the government is planning to set up 1,000 certified and standardized workshops and simplify the vehicle registration process. 


The incentive provision for electric vehicles is intended to boost EV adoption, reduce costly imported coal and the use of fossil fuel, and help Indonesia reach its Net Zero Emission target by 2060. 


On the other hand, this incentive has also seen some public criticism. A number of public figures have argued that the money would be better channeled into public transportation as it would reduce emissions as well as traffic congestion. Of particular concern in this argument is the planned cuts to incentives for electric rail train passengers by up to 50%.