Indonesia’s electric vehicle (EV) market is entering a new phase as government incentives for imported, fully built-up (CBU) EVs approach their expiration. Manufacturers like BYD and VinFast, once beneficiaries of generous tax breaks, are now required to fulfill local production commitments. This policy shift reflects Indonesia’s strategic push to become a regional hub for EV manufacturing and reduce reliance on imports.
Key Facts & Background
- Policy Framework:
Under the Regulation of the Minister of Investment No. 6/2023 and No. 1/2024, EV manufacturers importing CBU vehicles must provide a bank guarantee covering deferred import duties and luxury sales tax (PPnBM). - Production Commitment Timeline:
- CBU import incentives end on December 31, 2025.
- From January 2026 to December 2027, manufacturers must fulfill a 1:1 local production ratio—producing one locally assembled EV for every unit previously imported.
- Domestic Content Requirements:
- Minimum Tingkat Komponen Dalam Negeri (TKDN) of 40% in 2026
- Gradual increase to 60% by 2027, and 80% by 2030
- Current Participants & Investment Impact:
- Six manufacturers have joined the CBU incentive program
- Total committed investment: Rp 15 trillion
- Local production must serve the domestic market—not for export
- Key Players:
- BYD: Rp 16.2 trillion investment, 150,000-unit annual capacity
- VinFast: Rp 3.2 trillion investment, 170-hectare facility in Subang Smartpolitan
Strategic Insights
Indonesia’s evolving EV policy marks a deliberate shift from market stimulation through imports to industrial deepening via local manufacturing. The expiration of CBU incentives by end-2025 sends a clear signal: future growth must be anchored in domestic production, supply chain development, and technology transfer.
This transition is not merely regulatory—it’s strategic. By enforcing a 1:1 production ratio and escalating TKDN thresholds, the government aims to build a vertically integrated EV ecosystem. This includes not just assembly plants, but also component manufacturing, battery production, and R&D capabilities. Such a framework supports job creation, reduces trade deficits, and enhances national resilience in the face of global supply chain disruptions.
The policy also reflects Indonesia’s ambition to become Southeast Asia’s EV manufacturing hub. With abundant nickel reserves—a key input for lithium-ion batteries—and a growing consumer base, Indonesia is well-positioned to attract long-term investment. The entry of global players like BYD and VinFast, backed by multi-trillion rupiah commitments, validates the country’s potential.
However, the success of this strategy hinges on execution. Manufacturers must navigate local sourcing challenges, workforce readiness, and infrastructure gaps. The government, in turn, must ensure policy consistency, streamline permitting, and provide incentives for upstream industries. Failure to meet production commitments could result in forfeiture of bank guarantees, undermining investor confidence.
Importantly, the requirement that locally produced EVs be sold domestically—not exported—reinforces the government’s focus on building a robust internal market. This could accelerate consumer adoption, especially if paired with supportive measures such as charging infrastructure expansion, tax rebates, and public awareness campaigns.
In the long term, Indonesia’s EV policy could serve as a model for balancing industrial policy with environmental goals. By tying incentives to local value creation and sustainability metrics, the country is charting a path toward inclusive, low-emission mobility—one that aligns with its broader vision for economic transformation and climate resilience.