Indonesia Accelerates Electric Vehicle Transition with New Policies and Standards
In a bold move to combat rising environmental challenges and position itself as a regional leader in sustainable transportation, Indonesia has intensified its push toward a full-scale electric vehicle (EV) revolution. With air pollution and climate change increasingly affecting urban centers and coastal regions, the Indonesian government has elevated climate action to a national priority. Over the past five years, Jakarta has introduced a comprehensive suite of industrial policies, fiscal incentives, and technical regulations aimed at transforming the country’s automotive landscape. The goal is clear: to establish a self-sustaining EV ecosystem that reduces carbon emissions, strengthens domestic manufacturing, and attracts significant foreign investment.
The momentum began in earnest in 2019 with the issuance of Presidential Regulation No. 55, a landmark policy titled “Accelerating the Program for Battery Electric Vehicles for Road Transportation.” This regulation laid the foundation for Indonesia’s EV ambitions by mandating the use of locally produced components in electric vehicle manufacturing and setting targets for domestic content levels—known locally as Tingkat Komponen Dalam Negeri (TKDN). Under this framework, EV manufacturers were required to achieve a minimum of 40% local content by 2022, rising to 60% by 2027 and 80% by 2030. The policy also established a high-level coordination team led by Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, signaling the government’s top-down commitment to the sector.
Since then, Jakarta has steadily expanded its policy toolkit. By 2023, the government revised the original regulation through Presidential Regulation No. 79, reinforcing the TKDN targets and clarifying compliance mechanisms. These revisions reflect a maturing strategy—one that balances open investment with strategic localization. The message to global automakers is unambiguous: Indonesia welcomes foreign capital, but expects long-term integration into the national supply chain.
Fiscal incentives have played a crucial role in shaping market dynamics. One of the most impactful measures has been the adjustment of luxury goods tax (PPnBM), which now favors zero-emission vehicles. Under Government Regulation No. 73 of 2019, battery electric vehicles (BEVs), fuel cell electric vehicles (FCEVs), and plug-in hybrid electric vehicles (PHEVs) were granted preferential tax treatment. This was further refined in 2021 with Government Regulation No. 74, which reduced the effective tax rate on BEVs and FCEVs to zero, while increasing the rate for PHEVs to 15%. This shift underscores a policy preference for fully electric solutions over transitional technologies.
Complementing these tax reforms, the Ministry of Finance introduced additional incentives to stimulate both consumer demand and industrial investment. Through Ministerial Regulation No. 153/PMK.010/2020, companies engaged in R&D for electric vehicles, batteries, and related technologies are eligible for a super tax deduction of up to 300% of their research expenses. This generous incentive is designed to encourage innovation and attract high-tech firms to establish research centers in Indonesia.
For consumers, the government has implemented direct financial support. Ministerial Regulation No. 38/2023 introduced a partial value-added tax (VAT) relief program for the purchase of four-wheeled BEVs and electric buses during the 2023 fiscal year. Under this scheme, the government absorbed 10% of the 11% VAT for vehicles meeting a 40% or higher TKDN threshold, effectively reducing the consumer burden to just 1%. For electric buses with 20–40% local content, the government covered 5%, leaving buyers responsible for 6%. This tiered approach incentivizes both domestic production and consumer adoption, creating a virtuous cycle of market growth.
Infrastructure development has been another critical pillar of Indonesia’s EV strategy. Recognizing that charging availability is a key determinant of consumer confidence, the government designated the state-owned electricity company, PT PLN (Persero), as the primary agency responsible for deploying public charging stations. This mandate was formalized in Ministerial Regulation No. 13/2020 issued by the Ministry of Energy and Mineral Resources, which set technical standards for charging infrastructure, battery swapping facilities, and electrical safety protocols. The regulation also established guidelines for pricing and service quality, ensuring a standardized user experience across the archipelago.
Beyond charging, the government has taken steps to ensure that EVs meet rigorous safety and performance standards. The regulatory framework is overseen by multiple ministries, each with distinct but complementary responsibilities. The Ministry of Transportation is tasked with vehicle type approval, conducting physical inspections and certification through its Land Transport Directorate General. Regulations such as Ministerial Regulation No. 44/2020 and its subsequent amendments (Nos. 86 and 87 of 2020) outline detailed testing procedures for battery performance, electrical insulation, direct and indirect contact protection, and noise emissions.
The Ministry of Industry plays a central role in component-level regulation. It has mandated compulsory certification for critical automotive parts, including safety glass, tires, wheel rims, lubricants, and audio-visual equipment. These requirements are enforced through the Indonesian National Standard (SNI) system, administered by the National Standardization Agency (BSN). While SNI standards are typically voluntary, the government can designate them as mandatory for products affecting public safety, environmental protection, or national security. For EVs, this means that manufacturers must ensure compliance with SNI 15-0048-2005 for tempered safety glass, SNI 0098-2012 for passenger car tires, and SNI 7069-6:2021 for manual transmission gear oils, among others.
The Ministry of Environment and Forestry contributes by setting emissions and noise standards. Ministerial Regulation No. P.56/MENLHK/SETJEN/KUM.1/10/2019 establishes permissible noise levels for new vehicles, ensuring that even silent EVs do not compromise urban acoustic environments. Meanwhile, the Ministry of Communication and Information Technology oversees the digital and connectivity aspects of modern vehicles. Its regulations, including Ministerial Regulation No. 16/2018 and Director General Regulation No. 161/2019, govern the use of wireless communication systems such as Bluetooth, RFID, NFC, and dedicated short-range communications (DSRC) in automobiles. All electronic devices intended for use in Indonesia must obtain SDPPI certification before market entry, a requirement that applies equally to infotainment systems and advanced driver-assistance features.
Despite the comprehensiveness of this regulatory framework, challenges remain. One of the most pressing issues is the lack of alignment between Indonesian standards and international norms. Unlike some of its ASEAN neighbors, Indonesia has not fully adopted UNECE or ISO standards for automotive components. This divergence creates technical barriers to trade and complicates efforts by multinational manufacturers to harmonize production across markets. For instance, while safety glass, tires, and wheel rims are subject to mandatory SNI certification, the underlying standards differ from those used in Europe, Japan, or North America. Similarly, lighting systems, seat belts, and mirrors are not yet covered under mandatory SNI schemes, leaving gaps in the regulatory net.
However, signs of convergence are emerging. The ratification of the Regional Comprehensive Economic Partnership (RCEP) agreement has increased pressure on Indonesia to align its technical regulations with regional partners. As a member of ASEAN, Jakarta is also participating in ongoing dialogues aimed at harmonizing EV standards across Southeast Asia. The establishment of the Indonesia Electric Vehicle Association (Periklindo) in April 2021 marks a significant step in this direction. With 15 member companies—including international players like SAIC-GM-Wuling Indonesia and Dongfeng Sokon—Periklindo serves as a bridge between industry and government. In May 2023, the association joined the ASEAN Federation of Electric Vehicle Associations (AFEVA), alongside counterparts from Malaysia and the Philippines, signaling a growing commitment to regional cooperation.
Periklindo’s influence extends beyond advocacy. The organization actively participates in policy consultations, contributes to the development of technical standards, and promotes public awareness of EV benefits. Its strategic objective is to become a trusted advisor to the government on all matters related to electric mobility, from infrastructure planning to workforce development. This collaborative model reflects a broader trend in Indonesia’s governance approach—one that emphasizes public-private partnership as a driver of innovation.
Another notable development is the government’s strategic use of natural resources to anchor its EV ambitions. Indonesia holds the world’s largest reserves of nickel, a critical raw material for lithium-ion batteries. In January 2020, the government implemented a ban on raw nickel ore exports through Ministerial Regulation No. 11/2019, effectively compelling foreign investors to process the mineral domestically. This policy has already attracted major investments from companies such as Hyundai, LG Energy Solution, and CATL, which are building integrated battery manufacturing complexes in the country. By controlling the upstream supply chain, Indonesia aims to capture greater value from the global EV boom rather than merely serving as a source of raw materials.
This resource-based industrial strategy is complemented by targeted investment incentives. In March 2021, the government replaced its previous negative investment list with a “positive list” that explicitly encourages foreign investment in the EV sector. Under this framework, EV manufacturers can establish 100%-owned subsidiaries and qualify for substantial tax holidays. Projects exceeding 5 trillion IDR (approximately USD 320 million) are eligible for corporate income tax exemptions ranging from 5 to 20 years, followed by a 50% reduction for two additional years. Smaller investments between 1 and 5 trillion IDR receive a 50% tax break for five years, with a 25% reduction in the subsequent two years. These incentives have proven effective in attracting global players, including Tesla, which held high-level discussions with President Joko Widodo in early 2023 regarding potential factory construction.
Looking ahead, Indonesia’s EV trajectory will depend on its ability to balance openness with localization, innovation with regulation, and ambition with execution. While the current policy environment is favorable, sustained success will require continued improvements in infrastructure, workforce training, and regulatory transparency. The government must also address concerns about grid capacity, battery recycling, and equitable access to charging networks, particularly in rural and remote areas.
Moreover, as the domestic EV market expands, there will be increasing pressure to align with international standards. Achieving mutual recognition agreements with key trading partners could significantly enhance export potential and reduce compliance costs for manufacturers. The ongoing efforts to strengthen standardization cooperation within ASEAN, supported by initiatives like RCEP, provide a promising foundation for such alignment.
In conclusion, Indonesia’s electric vehicle transition represents one of the most ambitious industrial transformations in Southeast Asia. Backed by strong political will, a growing network of incentives, and a strategic focus on localization and resource integration, the country is positioning itself as a major player in the global EV value chain. While challenges persist, particularly in standardization and infrastructure, the trajectory is clear: Indonesia is no longer just a market for automobiles—it is becoming a manufacturer, innovator, and exporter of electric mobility solutions.
Pang Yu, Mo Dongli, Wang Quan Yong, Guangxi Institute of Standards and Technology, China Standardization, DOI: 10.3969/j.issn.1002-5944.2024.03.042