Indonesia plans US$5,000 subsidy for each electric-car purchase

JAKARTA: Indonesia is finalising subsidies for electric vehicle purchases to boost local adoption and bring in more investments.

The government plans to give subsidies of up to 80 million rupiah (RM22,515) for each purchase of an electric car made onshore, Industry Minister Agus Gumiwang said in a statement late Wednesday.

A hybrid electric car will get an incentive of around 40 million rupiah (RM11,257), an electric motorcycle about 8 million rupiah (RM2,252), while a motorcycle converted into an electric one will get 5 million rupiah (RM1,407).

The subsidy is meant to boost local sales of electric vehicles threefold by 2030, while also bringing in manufacturers to help President Joko Widodo realize his vision of having an end-to-end EV supply chain onshore.

It’s unclear how much local content the vehicles must have to qualify for the subsidies as Indonesia continues to push for a greater proportion of components made onshore.

Hyundai Motor Co. opened an EV plant on the outskirts of the capital Jakarta in March, but will only begin to use locally-made batteries from 2024. Toyota Motor Corp will begin to build hybrid cars this year, while Mitsubishi Motors Corp will produce hybrid and EVs onshore over the next few years.

Pushing Indonesia’s 275 million population to shift from combustion engines to electric cars could also reduce the fuel subsidy burden on the state budget. This year alone, the government had to spend nearly US$44 billion on keeping local gasoline prices low, with each reduction in subsidies prompting widespread protests.