Jakarta – Indonesia’s ambitious push to transition to electric vehicles faces a potential setback as key government incentives are set to expire this year. The national Energy Council (DEN) warns that waning consumer interest, coupled with the end of programs like import duty exemptions and subsidized VAT, could reverse gains in EV adoption and place renewed strain on the nation’s considerable fuel subsidy program. This development comes as President Prabowo Subianto’s administration balances economic priorities and fiscal stability.
Jakarta –
Indonesia’s fuel subsidy burden is expected to rise as public interest in electric vehicles (EVs) wanes, according to the National Energy Council (DEN). The decline in consumer appetite for EVs could be triggered by the cessation of government incentives designed to support the EV ecosystem.
M. Kholid Syeirazi, a member of DEN, characterized the potential end of these incentives as a significant challenge for the Indonesian EV market, anticipating a resulting downturn in retail EV sales.
Several key stimulus measures are slated to expire this year, including import duty exemptions for fully assembled battery electric vehicles (BEVs) and the government-subsidized Value Added Tax (PPN DTP) scheme, which covers 10% of the tax.
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“This situation risks suppressing EV sales at the retail level,” Kholid stated in a written statement on Thursday, January 15, 2026.
Decreased sales could directly impact the country’s fuel subsidy program, which currently operates under an open-ended system. Kholid argued that a more targeted, closed subsidy distribution system is needed to improve efficiency.
“Subsidies should be distributed in a closed manner. Whether or not EVs are involved, our fuel subsidy system isn’t currently reaching the intended recipients. The open system is highly vulnerable to moral hazard and irregularities,” he explained.
The removal of incentives, Kholid warned, could drive up vehicle prices and dampen consumer interest, which is particularly sensitive to cost. He noted that these incentives have been a key factor in encouraging consumers to switch from internal combustion engine (ICE) vehicles to EVs.
“The PPN is a significant driver of sales demand. These incentives sweeten the deal and encourage consumers to switch from ICE to EV. Without them, the price per unit could increase by around 15%,” he said.
Despite these concerns, Kholid acknowledged that ending the incentives is a logical consequence of maintaining the stability of the State Revenue and Expenditure Budget (APBN). The adjustment is seen as necessary to create fiscal space for President Prabowo Subianto’s priority programs.
However, Kholid urged the government not to completely abandon support for the EV industry. He suggested maintaining certain incentives, such as low regional taxes and non-fiscal benefits like exemptions from odd-even traffic policies.
Industry stakeholders and potential consumers are currently assessing the real-world impact of price increases on national sales, particularly in the first quarter of this year, Kholid added.
“Consumers are waiting to see what replacement incentives the government will offer. If the PPN DTP and import duty relaxations are revoked, the hope is for alternative tax instruments. As long as taxes remain low, it can still boost demand for the market,” he concluded.
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(ahi/ara)
