Indonesia is attracting investment in a big way! Easing import tax rules for electric vehicles

A new regulation in Indonesia shows that until 2025, some automakers will be given tax incentives for imported complete electric vehicles.

Indonesia, Southeast Asia’s largest auto market, is seeking to attract more investment.

The new regulations were signed on December 8 and released this week. Under the new regulations, companies that build electric vehicle factories in Indonesia, plan to increase investment in electric vehicles, or plan related investments will be eligible for tax incentives.

The new regulations will cover taxes on imported complete vehicles: import taxes and luxury goods sales taxes will be temporarily eliminated, and preferential measures will be given to taxes levied by provincial governments. Compared with the earlier provisions, the tax preferential system only targets CKD components of imported cars, which means that these cars can only be delivered in the form of parts and assembled in the country where they are sold.

However, according to the new regulations, the number of cars that a company can import will depend on the investment scale and development progress of the factory, and must be approved by the Ministry of Investment.

On Wednesday (December 13), Indonesian Deputy Minister of Investment and Maritime Coordination Rachmat
Kaimuddin told a webinar on Indonesia’s economic prospects that the new regulations will help carmakers establish their market in Indonesia by importing electric vehicles.

“We are trying to go a step further because once we build an electric vehicle industry in Indonesia, the battery industry will follow and we already have (the raw materials) and can build the supply chain,” he noted.

At the same time, the new regulations point out that the deadline for companies to produce electric vehicles in Indonesia must be at least 40% localized from 2023 to 2026.

The decree also postponed the 60% threshold for local purchases from 2024 to 2027 as originally planned.

In addition, the Indonesian government has also set an ambitious goal to produce about 600,000 electric vehicles by 2030, which will be more than 100 times Indonesia’s sales in the first half of 2023.

At present, some companies, including Hyundai Motor, have invested in Indonesia, followed by China’s Nezha Motors and Japan’s Mitsubishi Motors. The local government in Indonesia is showing favor to major electric vehicle manufacturers such as Tesla and BYD.