Indonesia to End Electric Vehicle Incentives in 2026

Government Policy Shift

The Indonesian government has announced that it will not continue electric vehicle (EV) incentives beyond 2025. Coordinating Minister for Economic Affairs, Airlangga Hartarto, confirmed that the current 10% reduction in Value-Added Tax (PPN) for electric vehicles will expire at the end of 2025. Speaking at the GJAW 2025 event, Airlangga emphasized that the two-year incentive period has been successful in encouraging local manufacturing of electric vehicles.

Rationale Behind the Decision

Airlangga explained that the incentives have achieved their intended purpose. Many electric vehicle manufacturers have begun assembling vehicles in Indonesia through Completely Knocked Down (CKD) production. The minister highlighted that the incentives provided during the initial phase have been effective in attracting investment and boosting local production capacity.

Impact on the Automotive Industry

The decision to end incentives marks a significant shift in the government's automotive policy. While the immediate impact on consumers may be negative due to potentially higher prices, the long-term benefits include a more established local EV industry. The removal of incentives is expected to test the competitiveness of Indonesia's nascent EV manufacturing sector.

Future Prospects

As Indonesia moves forward with its electric vehicle strategy, the focus is likely to shift towards maintaining the momentum achieved during the incentive period. The government may need to consider other support measures to ensure continued growth in the EV sector, particularly in areas such as infrastructure development and technology support.