Indonesia's EV market expected to stay robust

The Indonesian electric vehicle market is expected to remain strong even if the government decides to end the tax incentive program that has boosted sales in the past few years, industry executives said.

Indonesia extended import and sales tax exemptions to EV importers in 2023, allowing retailers to offer at lower prices and boost domestic consumption.

This policy, however, is supposed to officially end by December 2025. Setia Diarta, director-general for metal, machinery, transportation equipment and electronics at the Indonesian Ministry of Industry, said officials are still discussing plans to either extend or terminate the EV tax exemptions policy.

"Hopefully, (a decision) will be made soon," Diarta said in a Feb 5 briefing held at the sidelines of the Indonesia International Motor Show 2026 in Jakarta.

Moeldoko, chairman of the Indonesian Electric Vehicle Industry Association, expressed hope that the government will make an official announcement soon. But with or without tax incentives, Moeldoko is confident that retail prices of EVs will remain competitive.

He said the rapid development of EV technology has reduced the cost of manufacturing batteries, making EVs more affordable for consumers.

Arif Pramadana, vice-president of Wuling Motors Indonesia, said carmakers are prepared for any policy changes and trust that "the government will always be supportive" of the industry.

Indonesia is one of the biggest automotive markets and car manufacturers in Southeast Asia. Its total car sales in 2025 crossed 800,000 units, of which EVs accounted for 15 percent, according to the Association of Indonesian Automotive Industries. The over 100,000 EVs sold last year were about four times the 17,000 units sold in 2023.

"In the Southeast Asian region, Indonesia is the most attractive (market) for doing EV business due to its big population, which reaches (over) 280 million people," said Jongkie Sugiarto, chairman of the Association of Indonesia Automotive Industries.

Investing in local plants

Amid this booming market, Chinese EV brands are among the most popular in Indonesia and have pushed these companies to invest on local manufacturing plants.

Sugiarto said many Chinese investors have expressed interest in building battery charging stations in Indonesia, following the footsteps of Chinese companies already operating in the country.

Luther Panjaitan, head of public and government relation at BYD Indonesia, said tax incentives helped raise BYD's car sales, and BYD's cars will remain competitively priced even if the government changes its policy.

The Chinese carmaker entered the Indonesian market in 2024 and now accounts for over half of the domestic EV sales. BYD is currently building a factory in West Java which will have an annual production capacity of 150,000 EVs.

Bhima Yudhistira, founder and executive director of the Center of Economic and Law Studies, said Indonesia needs China for EV technology transfer, and investments that will develop the nickel downstreaming sector.

Fabby Tumiwa, chief executive officer of the Institute for Essential Services Reform, a Jakarta-based think tank, said the government needs to maintain these tax incentives to encourage more motorists to shift to EVs. A higher EV adoption rate will help reduce Indonesia's energy imports and ease the pressure on its trade balance, he said.

Andry Ciu, chief executive officer of AION Indonesia, said he is confident the government will continue to support the EV industry not only to maintain clean air but also to help ease traffic congestion.

The author is a freelance journalist for China Daily.