Indonesia Announces Subsidies to Boost EV Uptake

Indonesia has unveiled a subsidy program to boost the domestic sales of electric vehicles (EVs), as part of its broader efforts to accelerate the adoption of EVs and attract investment from major car and battery manufacturers.

Announcing the policy on Monday, senior cabinet minister Luhut Pandjaitan and Industry Minister Agus Gumiwang Kartasasmita said that it will cover the sales of 200,000 electric motorcycles and 35,900 electric cars. It will also cover the conversion of 50,000 combustion-engine motorcycles to electric propulsion systems.

The subsidy program, which will begin on March 20, is a complement to Indonesia’s efforts to develop domestic EV production facilities to take advantage of the country’s rich reserves of nickel, a key component of the lithium-ion batteries used in EVs. President Joko Widodo has set a target of having EVs make up 20 percent of all cars by 2025. Luhut has previously expressed hopes for Indonesia to become “one of the top three countries in the world producing EV batteries as well as electric cars” by 2027.

The government did not announce the total budget allocated for the program, but stated that 7 million rupiahs (around $460) would be paid to manufacturers and retailers for each new electric motorcycle sold and each converted to electric. To be eligible, a company must make sure that the motorbike is locally made or that at least 40 percent of its components are domestically sourced.

In an effort to accelerate the transition to EVs, the Indonesian government has announced subsidies for the purchase of new e2W and the conversion of existing petrol models. It is expected that this will encourage investment in local industry to produce batteries, produce e2W, and push mass adoption of electric vehicles.

The International Council on Clean Transport (ICCT) gives us more detail: “In December 2022, Indonesia’s Minister of Industry, Agus Gumiwang, announced the government’s plan to provide purchase subsidies for electric cars, hybrid cars, and electric motorbikes, and to subsidize the cost of converting combustion-engine motorbikes to electric. Under the scheme, a subsidy of IDR 80,000,000 (~US$ 5,130) will be given for purchasing a new battery-electric vehicle and half that amount for purchasing a conventional hybrid. New electric motorbikes will receive a purchase subsidy of IDR 8,000,000 (~US$ 520), and the government will pay IDR 5,000,000 (~US$ 320) for converting an ICE two-wheeler to an electric two-wheeler.”

“We are launching this programme so that the massive adoption of battery electric vehicles can be achieved soon, and the Indonesian transportation industry can be transformed to a greener industry,” senior Indonesian cabinet minister Luhut Pandjaitan said at the March 2023 news conference. Vehicles eligible for the subsidy have to meet minimum local content requirements, he said. The government hopes that adding 1 million e2Ws by 2024, and a further million by 2025, it will help develop EV production facilities to take advantage of the country’s rich nickel reserves for battery production and reduce fossil fuel consumption. Hopefully Tesla can also be a part of the battery landscape in Indonesia and help expand the EV fleet.