Indonesia’s government has announced a significant reduction in value-add tax (VAT) on battery-based electric vehicle (EV) sales from 11% to just 1%. The move is aimed at encouraging the adoption of EVs and attracting investment into domestic production.
The Coordinating Ministry of Maritime and Investment Affairs stated that the incentive came into effect this month and will remain in place until the end of the year. Some electric buses will also benefit from a VAT cut.
Indonesia is eager to leverage its rich reserves of nickel, which is processed for battery production, to attract investment from electric car makers such as Tesla and China’s BYD Auto.
South Korea’s LG and Hyundai have already started constructing plants to assemble batteries and EVs in the country. The government had also announced a 7 trillion rupiah ($466.70 million) allocation in state funds to subsidize electric motorcycle sales through 2024.
In conclusion, Indonesia’s VAT cut on battery-based EVs is expected to boost the domestic production of EVs and related components, including batteries, and to enhance the adoption of EVs in the country.