Jakarta. Electric vehicle (EV) incentives are no longer a market sweetener but a strategic necessity to safeguard Indonesia’s energy sovereignty, as volatile global oil prices heighten urgency to curb reliance on fossil fuels.

Bank Permata Chief Economist Josua Pardede said accelerating EV adoption is critical to reducing dependence on fuel imports and cushioning the domestic economy from external energy shocks.

“Amid global energy uncertainty, incentives are no longer just a market sweetener, but a combined instrument of industrial, energy, and fiscal policy,” Josua said on Monday.

He explained that vehicle electrification acts as a fiscal buffer by gradually easing pressure on energy subsidies as fuel consumption declines over the medium term.

Josua added that the current period of elevated oil prices presents an optimal window for the government to push EV adoption more aggressively, as the economic benefits of switching become more tangible for both households and the state.

“When oil prices rise, the economic benefits of transitioning to electric vehicles become more evident, both for households and for the country,” he said.

However, he stressed that electrification should be prioritized in segments with the highest fuel-saving potential, including motorcycles, public transport, buses, urban logistics fleets, and government operational vehicles.

On market effectiveness, Josua underscored that incentives remain a decisive factor, given that most Indonesian consumers operate within a vehicle price range of Rp 100 million to Rp 500 million ($5,800 to $29,100), making them highly price-sensitive.

“Without incentives, even a small price gap can significantly slow adoption,” he said.

Looking ahead, he urged the government to redesign incentives beyond purchase subsidies to also cover investment and usage aspects, while strengthening local content requirements (LCR), or locally called Tingkat Komponen Dalam Negeri (TKDN).

Such measures, he said, would not only support domestic manufacturing but also advance long-term energy independence.

“The right direction is not to phase out incentives, but to transform them from purely boosting sales into instruments that strengthen domestic industry and gradually reduce energy dependence,” Josua concluded.