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INDONESIA: Government Bids to Nurture Domestic Electric Vehicle Sector

Under the terms of the recently-issued Presidential Regulation No. 55 of 2019, the development of domestic facilities for the manufacturing of electric vehicles (EVs) and related components is to be prioritised. This will see the government incentivising EV and EV parts manufacturers, providing state-support for the development of an EV-charging infrastructure; regulating electricity tariffs for charging stations; and providing official guidelines for the development of the overall EV ecosystem in line with internationally-accepted technical specifications.

For their part, companies will be obliged to ensure that all EVs manufactured in the country use a certain percentage of domestic components. In the case of two-wheeler EVs (such as electric motorcycles), for the period 2019-2023, at least 40% of the utilised components must be domestically-produced. For the period 2024-2025, the required localisation rate will rise to 60%, before settling at 80% from 2026 onwards.

In respect of four-wheeled EVs, at least 35% of all utilised components must be domestically produced in the period 2019-2021. This will then rise to 40% for 2022-2023 and 60% for 2024-2029, before settling at 80% from 2030 onwards. Should certain essential EV components not be available locally, however, manufacturers can import such parts after securing approval from the Ministry of Industry.

As it stands, both the central government and local government authorities will have the discretion to introduce bespoke incentive packages. Such measures are expected to include duty reductions/exemptions for certain imported EV components for specified periods of time; exemptions from luxury sales tax for designated EVs; exemptions from a number of central and provincial levies; duty-free import of machinery and capital goods; state export-financing schemes; and incentives related to the implementation of EV charging facilities on a national scale.

Overall, it is hoped that the measures will provide a route map for the wider adoption of EVs as well as establishing the country as an EV manufacturing and export hub within the ASEAN bloc. The measures are also aimed at nurturing an ancillary EV industry, especially with regard to battery manufacture. Joko Widodo, the Indonesian President, has also recently indicated that overseas investors who set EV component manufacturing plants in the country may be able capitalise on the its domestic cobalt and manganese resources as a means of cost-effectively manufacturing EV batteries.

Content provided by Picture: HKTDC Research
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