Indonesia Relaxes Tax Rules on EV Imports to Attract Investment

As part of an effort to lure in additional investment, the Indonesian government has announced that it will provide tax breaks on fully assembled electric vehicles (EVs) until 2025, to auto manufacturers who intend to construct electric vehicle plants in Indonesia, which is Southeast Asia’s biggest auto market.

Companies that have invested in EV facilities, intend to grow their EV investments or are considering investing would be eligible for the benefits under the new regulations.

Under the new regulations, built-up automobiles coming into the nation will no longer be subject to import customs or the luxury goods sales tax, and provincial governments would receive incentives on the taxes they collect. Earlier rules only granted these incentives to imports of knocked-down vehicles, which are delivered in parts and assembled in the country where they are sold.

However, the number of vehicles companies can import would depend on the investment size and development progress of the plant, and must be approved by the investment ministry. Speaking at a webinar on Indonesia’s economic prospects, Rachmat Kaimuddin, a deputy at the Coordinating Ministry of Investment and Maritime Affairs, said the new decree would help automakers build their market in the country through EV imports. He said:

“We try to be progressive, because once we have created an EV industry in Indonesia, the battery (industry) will also come, and we already have the (raw) material and can create the supply chain.”

Additionally, a deadline for companies to produce at least 40% of the content of electric vehicles (EVs) in Indonesia has been pushed back from 2023 to 2026 by the new legislation. Furthermore, the decree pushes out the original 2024 target date for raising the local content level to 60% until 2027.

Indonesia’s government has set an ambitious target of producing some 600,000 EVs by 2030. That would be more than 100 times the number sold in Indonesia in the first half of 2023. Some companies including Hyundai have invested in Indonesia followed by investment commitments by China’s Neta EV brand and Mitsubishi Motors. Indonesia is also wooing Tesla and China’s BYD to invest in the country.

Source: Reuters