Indonesia's newly issued Presidential Regulation No. 79 of 2023 offers fresh insights into whether the country can leverage its electric vehicle (EV) industry to achieve economic transformation. The regulation focuses on attracting EV importers through fiscal incentives while adjusting local content requirements (TKDN), aiming to boost domestic EV industry development.
Key Policy Measures
The new regulation introduces several critical provisions:
- Tariff and Tax Reductions: The government will provide import duty and luxury goods sales tax exemptions for qualified pure EV importers. This measure aims to lower import costs and enhance market attractiveness, potentially accelerating EV adoption by attracting more international brands.
- TKDN Adjustments: The policy establishes phased local content requirements with transition periods. For two/three-wheeled EVs, the TKDN must reach at least 40% from 2019-2026, 60% from 2027-2029, and 80% from 2030 onward. Four-wheeled EVs and larger must achieve 35% from 2019-2021, 40% from 2022-2026, 60% from 2027-2029, and 80% from 2030 onward. Notably, the original 2024 deadline for 40% TKDN compliance has been extended to 2026, giving manufacturers more time to adapt to localization requirements.
Policy Implications
The dual approach of this policy simultaneously lowers short-term barriers for EV imports while gradually increasing localization demands. This strategy seeks to attract foreign investment while compelling manufacturers to eventually establish local production, facilitating technology transfer and industrial upgrading.
However, the policy's success depends on Indonesia's ability to develop supporting domestic industries and maintain consistent policy implementation. The extended TKDN timelines acknowledge current limitations in local manufacturing capacity while maintaining pressure for eventual localization.
Strategic Balance
Indonesia's EV policy represents a calculated attempt to reconcile immediate market needs with long-term industrial development goals. By combining import incentives with progressively stricter localization requirements, the government aims to cultivate a competitive domestic EV supply chain.
The effectiveness of this approach remains to be seen, with domestic manufacturers' ability to capitalize on these opportunities being crucial to the policy's ultimate success. As Indonesia positions itself as a key player in Southeast Asia's EV market, the coming years will reveal whether this balanced strategy can deliver both industrial growth and economic transformation.