Tax Cuts Boost EV Sales in Indonesia

After the government introduced tax incentives, the sale of electric vehicles in Indonesia increased last month. This is a promising indicator that the largest economy in Southeast Asia is beginning to adopt EVs.

Indonesia reduced the value-added tax (VAT) on electric automobiles from 11% to just 1% as of April, provided they are produced with at least 40% local parts.

penyerahan kunci dan pembelian mobil listrik IONIQ 5

Sanghoon Yoon, an executive with Hyundai Motor ASEAN, told Reuters on the sidelines of a seminar on energy transition in Jakarta that sales of the Hyundai IONIQ 5 EV, a model that qualifies for the tax break, increased three-fold to more than 600 units in April compared to the prior month. Yoon said Hyundai aims to sell 10,000 units of IONIQ 5 in Indonesia this year, helped by the tax cut and as a shortage in semiconductor chips eases. That compares with 3,000 units sold since the model was launched in Indonesia in 2021. He said:

“At the moment EVs are very expensive because of the battery. So I think in the beginning we need a kind of subsidy from the government and it will increase the demand for EVs.”

According to Dian Asmahani, marketing director for SGMW Motor Indonesia, sales of the Wuling Air EV, a mini electric automobile increased by more than 80% monthly to reach more than 740 units. Air EV along with IONIQ 5 are the two most popular electric cars in Indonesia. Automakers are planning to introduce more battery-EV models in Indonesia to capture the growing market.

Fitch Ratings stated that sales of four-wheeled EVs, including hybrid models, are anticipated to surpass 50,000 units in Indonesia in 2023, up from 20,681 units last year, and noted that the Indonesian government’s incentives might potentially improve the projection.

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