Indonesia Plans EV Purchase Subsidies in 2023 to Spur Sales

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(Bloomberg) — Indonesia plans to begin subsidizing purchases of electric vehicles next year as the country aspires to have 2.5 million EV users by 2025 to boost demand and reduce air pollution. 

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The government is deciding on the magnitude and its precise mechanism, said Transport Minister Budi Karya Sumadi in an interview on Thursday, promising that the new rule will become a “game changer” for the domestic industry. 

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“Someone asked me why is Indonesia so ambitious with EVs,” said Sumadi. “Maybe because he doesn’t experience the same thing as we do here in terms of air pollution coming from combustion engines.”

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Indonesia ranks 17th among the world’s most polluted nations, according to IQAir index, which provides scores for air quality in 117 countries. 

The latest incentive adds to a list of EV policies introduced by President Joko Widodo over the past year as the world’s largest producer of nickel used in batteries seeks to stop exporting raw materials and move up the value chain. 

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Regulators are also considering subsidies for the conversion of internal combustion vehicles, Sumadi said. The government is studying the plan carefully as it will create a major shift in the labor-intensive automotive industry, he said.  

Sumadi said the ministry will approach existing carmakers in Indonesia like Hyundai Motor Co. and China’s BYD Co. to build the EV ecosystem for the nation’s new capital city in Borneo, which is intended to fully run on renewable energy. 

Earlier this year, the government ordered all state offices to shift to electric vehicles and told state utility PLN to ramp up charging stations to reach a target of 2 million users of electric motorcycles and 500,000 of electric cars in less than 4 years. Sumadi expects the public transport sector to be fully electrified in five years. 

There are around 28,188 electric vehicles in Indonesia as of Oct. 3, of which 22,942 are motorcycles and 4,904 are cars, according to the ministry data. The rest are buses, lorries and three-wheelers.

Electric motorbikes will likely lead in terms of growth as they are reaching a price equilibrium with their internal combustion counterparts faster than electric cars, said Sumadi.