Jakarta. The Indonesian government on Monday announced that it would launch incentives for electric vehicles or EVs later this month.

"[The incentives] will come into effect on March 20. We have already reached the final stage," Chief Investment Minister Luhut Binsar Pandjaitan told reporters in Jakarta on Monday.

Luhut attributed the sluggish mass adoption of EVs in the country to the price gap between the low-emission vehicles and their traditional internal combustion engine (ICE)-based counterparts. The incentives are expected to narrow the price gap and eventually drive demand. 

According to Luhut, many countries, including Indonesia’s close neighbors, have already begun granting incentives to spur EV mass adoption and attract foreign investment. Indonesia needs to do the same to woo EV producers to invest in the country.

“We do not use the term ‘incentives’, but ‘government assistance’,” Luhut said.

“If the government assistance program goes well and Indonesia sees mass EV adoption, the domestic EV industry will take shape. Going forward, EVs will also become far more affordable,” he added.

The government revealed during the press conference that it would grant Rp 7 million ($457) in government assistance for 200,000 units of new electric motorbikes throughout 2023. The e-motorbikes, however, must be produced domestically and have at least 40 percent local content. 

The same amount of incentives will apply to the conversion of 50,000 conventional motorbikes.

About 138 buses and 35,900 electric cars will get the incentives this year. The government chose to announce the exact amount for the subsidies for electric cars or buses at a later time. 

To date, there are two EV producers in Indonesia that are eligible for the incentives, namely Hyundai and Wuling. Three electric motorbike producers Gesits, Volta, and Selis can also receive incentives once the regulation enters into force, according to Industry Minister Agus Gumiwang Kartasasmita.

“We are working on the general guidelines. So the Finance Ministry can allocate the budget for this EV government assistance,” Agus told the same presser.

Agus said the car dealers would first check the potential buyers’ ID cards to make sure they are entitled to the incentives. If eligible, the buyer will get a discount. The dealers will need to input the data, and later can claim the incentives from the members of the State-Owned Bank Association (Himbara). If the data matches, the Himbara banks will reimburse the incentives to the producers. 

“We are giving the incentives to the producers as this would make the monitoring much easier,” Agus said.

The prioritized buyers for the discounted EVs are the micro, small, and medium enterprises (MSMEs), particularly micro-loans and working capital aid beneficiaries, as well as families who subscribe to 450-900 volt-amperes (VA) of electricity.

A person can only receive the EV incentives once.

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