Indonesian government to incentivise EV adoption, targeting 200,000 cars and motorcycles
At a recent state budget press conference in Jakarta, Indonesia's finance minister Purbaya Yudhi Sadewa revealed that the country's government will be introducing incentives to encourage the adoption of 100,000 electric cars and 100,000 electric motorcycles.
Hyundai opened its first manufacturing plant in Southeast Asia in Indonesia in 2022
Hyundai
The decision to incentivise the shift to electric vehicles came after Purbaya Yudhi Sadewa, finance minister for Indonesia, met with the country's industry minister Agus Gumiwang Kartasasmita to discuss fiscal measures to boost the appeal of EVs to domestic consumers.
Incentives will target an initial 100,000 cars and 100,000 motorcycles, but Purbaya said that the programme would be extended if those targets are reached.
Purbaya did not confirm exactly how the incentive would be disbursed, but said that Agus, along with Indonesia's coordinating minister for economic affairs Airlangga Hartarto, would outline details at a later stage. Similarly, the exact amount that will be offered to incentivise EV adoption has not been confirmed, but is expected to be announced soon.
According to Purbaya, the Indonesian government to use this policy strengthen the country's economic growth by boosting demand while supporting domestic manufacturing and encouraging greater involvement from the private sector.
The finance minister emphasised how encouraging consumers to go electric would help reduce the country's fuel consumption – a growing concern as fuel costs remain high amid disruption in the Middle East.
Southeast Asia particularly exposed to energy crisis
A recent report from the Institute for Energy Economics and Financial Analysis (IEEFA) found that economies in Southeast Asia are amongst the most vulnerable to inflationary pressure as a result of disruption to global oil markets due to the fact that more than 80% of the crude oil and liquefied natural gas (LNG) transiting the Strait of Hormuz was bound for Asia, and fossil fuels comprise a significant share of the energy mix in Indonesia, Malaysia, Thailand, Vietnam and the Philippines.
More specifically, Indonesia imports approximately 60% of its oil and provides a per-litre fuel subsidy to keep fuel affordable for consumers. Therefore, a spike in energy prices directly impacts public funding.
Because of this, the International Council on Clean Transportation (ICCT) has estimated that EVs in Indonesia last year saved around $5.8 billion in public spending by switching from government-subsidised imported fuels to domestically produced electricity.
By incentivising more consumers to follow suit in making the switch to EVs, the country can not only save potentially billions more in fuel costs, but also restrict its dependance on other countries for fuel and its exposure to energy crises like the one currently being experienced around the globe – therefore boosting its economic resilience.
How might increased EV adoption impact manufacturing and supply chain operations in Indonesia?
Beyond reducing fuel imports, the incentives could also strengthen Indonesia’s broader ambition to become a major EV manufacturing and battery production hub in Southeast Asia. In recent years, Indonesia has leveraged its vast reserves of nickel – a critical raw material used in lithium-ion batteries – to attract global automakers and battery producers to the country.
Hyundai Motor Company has emerged as one of the country’s most prominent EV investors, opening a vehicle manufacturing plant in Bekasi in 2022, where it produces models including the fully electric IONIQ 5 with an annual production capacity of up to 250,000 units.
The automaker has also partnered with LG Energy Solution to establish Indonesia’s first EV battery cell production facility in Karawang, which began operations in 2024 and is capable of producing batteries for more than 150,000 EVs annually.
Chinese automakers have also accelerated their expansion into Indonesia as competition intensifies across Southeast Asia’s EV market. BYD is reportedly close to opening its own EV assembly plant in Subang, capable of producing approximately 150,000 vehicles each year.
Stronger domestic demand for EVs could further encourage manufacturers and suppliers to deepen localisation efforts in Indonesia, including battery processing, component manufacturing and vehicle assembly, rather than relying on imported EVs. That could help Indonesia compete more directly with regional manufacturing rivals such as Thailand and Vietnam, both of which are also seeking to position themselves as regional EV production hubs.
