Indonesia is preparing to phase out financial incentives for electric vehicle (EV) purchases after 2026, signaling a key turning point in the nation’s ambitious push to become a regional EV manufacturing hub.The government, having successfully attracted significant investment in domestic EV production facilities, now believes the industry is poised for self-sustained growth.This policy shift will impact both consumers and manufacturers as current incentives-including VAT exemptions and tax reductions-begin to expire, possibly influencing EV adoption rates in Southeast Asia’s largest economy.
Jakarta –
Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, announced that the government will not extend incentives for electric vehicles beyond 2026. Hartarto indicated that continued subsidies are no longer deemed necessary for the automotive sector, expressing confidence that the Indonesian automotive industry will remain robust even without them.
“The cessation of these incentives will actually spur development,” Hartarto stated during the inauguration of VinFast’s factory in Subang, West Java, on December 15, 2025. “The stimulus was intended to encourage the construction of factories. Now that these factories are built, cost structures will be lower.”
The move signals a shift in the Indonesian government’s strategy towards fostering a self-sufficient domestic electric vehicle industry. The initial incentives were designed to attract investment and establish a manufacturing base, and officials believe that foundation is now strong enough to support continued growth independently.
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Hartarto also noted that the government’s incentive program successfully stimulated consumer demand for electric vehicles by lowering purchase prices. This increased affordability has been a key driver of adoption in the Indonesian market.
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Ilustrasi – VinFast, merek kendaraan listrik Vietnam di bawah Vingroup, menghadirkan two new models at the Gaikindo Jakarta Auto Week (GJAW) 2025 at ICE BSD City, Friday (21/11/2025). Photo: Andhika Prasetia/detikcom
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“As a result, vehicles are now available for around Rp 152 million. Before this policy, no cars were priced below Rp 200 million,” Hartarto explained, referencing the impact of the incentives on vehicle affordability.
Currently, several incentives are in place within the Indonesian automotive industry, including a 10% Value Added Tax (VAT) exemption for electric vehicles, effective through the end of 2025.
The 10% VAT exemption for electric vehicles is outlined in Finance Minister Regulation Number 12 of 2025. Locally produced electric vehicles meeting specific local content requirements (TKDN) are eligible for the exemption, reducing the buyer’s tax burden. Requirements include local production and a minimum domestic component level of 40%. Incentives also extend to hybrid vehicles, with a government-funded tax reduction of 3%.
(lth/dry)
