Indonesian Electric Vehicle Boom: A temporary trend or a long-term vision?

Indonesia aims to deploy 2 million electric cars and 12 million electric two-wheelers by 2030 to reduce carbon emissions and leverage its nickel reserves for battery production. To achieve this, the government implemented a VAT reduction (from 11% to 1%) for EVs meeting a 40% local content requirement and a 0% import duty for foreign manufacturers who commit to building domestic factories by 2026. While these policies have increased EV sales—with BYD alone accounting for half of total EV sales following the import policy—they have created market imbalances. Established players like Hyundai, which invested in charging infrastructure and local battery production, have seen sales drop and have responded by restricting public charging stations to their own vehicles. The document warns that conflicting incentives and low local content thresholds may lead to a temporary boom of imported vehicles rather than a robust domestic ecosystem.

• Indonesia has set a target to deploy 2 million electric cars and 12 million electric two-wheelers by 2030 to lower carbon emissions, as the transportation sector is a major CO2 source; specifically, 11 million cars currently produce over 35 million tons of carbon emissions annually, representing 70%–80% of city emissions.
• The government uses two primary financial incentives: a VAT reduction from 11% to 1% for EVs with at least 40% local content, and a 0% import duty for manufacturers who commit to establishing domestic factories by 2026, backed by a bank guarantee.
• Import incentives have led to a rapid increase in market share for foreign brands, with BYD capturing half of total EV sales, which contributed to a significant decline in Hyundai's average monthly sales from 600 units in late 2023 to 180 units between February and September 2024.
• There is a risk that the current policy framework prioritizes short-term imports over a domestic industry because the 40% local content threshold is often met only through final assembly of imported parts, and the 0% import duty provides a cheaper alternative that delays local manufacturing commitments.
• The disparity in subsidies may create unfair competition; for every USD 10 in sales, the government foregoes approximately USD 2.6 in tax revenue for BYD compared to USD 1 for Hyundai.

APA

Suharsono, A., & Bridle, R. (2025). Indonesian Electric Vehicle Boom: A temporary trend or a long-term vision? International Institute for Sustainable Development. https://www.iisd.org/articles/deep-dive/indonesian-electric-vehicle-boom-temporary-trend-or-long-term-vision

Chicago

Suharsono, Anissa, and Richard Bridle. Indonesian Electric Vehicle Boom: A temporary trend or a long-term vision? International Institute for Sustainable Development, 2025. https://www.iisd.org/articles/deep-dive/indonesian-electric-vehicle-boom-temporary-trend-or-long-term-vision.

Wikipedia

{{cite report |last1=Suharsono |first1=Anissa |last2=Bridle |first2=Richard |title=Indonesian Electric Vehicle Boom: A temporary trend or a long-term vision? |publisher=International Institute for Sustainable Development |date=7 February 2025 |url=https://www.iisd.org/articles/deep-dive/indonesian-electric-vehicle-boom-temporary-trend-or-long-term-vision |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{suharsono2025indonesian, author = {Suharsono, Anissa and Bridle, Richard}, title = {{Indonesian Electric Vehicle Boom: A temporary trend or a long-term vision?}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = feb, url = {https://www.iisd.org/articles/deep-dive/indonesian-electric-vehicle-boom-temporary-trend-or-long-term-vision}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }