Indonesia is entering a new phase in its electric vehicle (EV) strategy, shifting from market testing to industrial localization. Automakers that benefited from zero import duties must begin producing EVs domestically at a 1:1 ratio starting January 2026. This policy pivot aims to deepen manufacturing capabilities and accelerate the national EV ecosystem.
Key Facts & Background:
- Since February 2024, Indonesia waived import duties and luxury tax (PPnBM) for fully built-up (CBU) battery electric vehicles (BEVs) under Ministerial Regulation No. 6/2023 jo No. 1/2024.
- Automakers were required to submit bank guarantees and commit to producing one local unit for every imported unit.
- The incentive program ends December 31, 2025; no extension is currently planned.
- Starting January 2026, manufacturers must fulfill local production commitments and meet domestic content (TKDN) targets:
- 40% TKDN in 2026
- 60% in 2027
- 80% by 2030
- EV investment in Indonesia totals Rp5.653 trillion, with Rp4.12 trillion allocated to electric cars across nine manufacturers.
- Combined production capacity stands at 70,060 units/year, with major players including BYD, Geely, VinFast, and Xpeng.
Strategic Insights: Indonesia’s transition from import-driven EV adoption to domestic manufacturing marks a critical inflection point in its industrial policy. The 1:1 production mandate and TKDN roadmap are designed to stimulate job creation, reduce import dependency, and foster supply chain development—especially in battery manufacturing, a high-cost component. By enforcing local production, the government aims to anchor foreign investment and ensure long-term value capture within its borders. The expiration of import incentives will likely reshape pricing dynamics, pushing automakers to accelerate factory completion and localization strategies. For Indonesia, this shift aligns with broader goals of energy transition, industrial sovereignty, and regional competitiveness in the EV sector. If executed effectively, it could position the country as a manufacturing hub for Southeast Asia’s electric mobility future.