Indonesia looking to push assembly and adoption of pure EVs by raising taxes on PHEVs and hybrids

Indonesia looking to push assembly and adoption of pure EVs by raising taxes on PHEVs and hybrids

Indonesia is looking to push the adoption of pure electric vehicles (EV) by raising the tax for plug-in hybrids. The new regulation, which will only apply to locally-assembled vehicles, was announced by the country’s finance ministry earlier this week, Bloomberg reports.

The move is aimed at encouraging automakers to build EVs in the country instead of hybrids. Battery-powered EVs will continue with a 0% luxury tax rate, while plug-in hybrid vehicles will see their tariff increase from 0% to 5%. Full and mild hybrids will also see a tax increase, will a new rate of 6%-12% compared to a previous range of 2%-12%.

The government is hoping that the tax increase for PHEVs will allow carmakers to price EVs more competitively against hybrids, which are cheaper to manufacture. “Investors who will build electric cars in Indonesia feel that they are not competitive enough because the tax rate is not differentiated from plug-in hybrids,” finance minister Sri Mulyani Indrawati said.

Indonesia looking to push assembly and adoption of pure EVs by raising taxes on PHEVs and hybrids

Higher rates for hybrids are planned in the future. These will come into effect two years after the battery-powered EV sector realises investments of 5 trillion rupiah (RM1.43 billion), or when it starts commercial production with an investment of the same amount. After this, PHEVs will be taxed at a rate of 8%, while other hybrids will see a tariff of 10%-14%, according to the draft of the new regulations.

The initiative is part of a larger plan by the country to meet its ambition of becoming a global EV battery hub. The country wants to expand its role as a major source of nickel, which is used in batteries for electrified vehicles, to producing other components as demand for greener transport skyrockets globally.

However, despite the push, it remains to be seen if there will be significant take-up of EVs, both from a manufacturing and consumer viewpoint. Only 120 electric vehicles were sold in the country last year, about a tenth of the sales of hybrids, according to industry data. Lawmakers from various parties have also expressed reservations about the move, saying it might be premature to hike taxes.

Indonesia looking to push assembly and adoption of pure EVs by raising taxes on PHEVs and hybrids

Proponents are using emissions as a plus factor in making the switch to cleaner motoring, in addition to the economic impact of such a move. “Indonesia can have more opportunities to become a big player in electric vehicles. Battery-powered EVs have more impact to reduce gas emissions rather than hybrid ones,” said Febrio Kacaribu, head of fiscal policy at the finance ministry.

Indonesia has committed to reduce its emissions by at least 29% by 2030 under the Paris Agreement. At present, about 30% of the country’s total emissions comes from the transport sector, with land transport making up the bulk of it.

The country has previously stated its intent to mass-produce fully electric vehicles by 2025 in a bid to reduce greenhouse gas emissions, and said it was aiming to churn out at least 19,000 EVs and 750,000 electric motorcycles by then.

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Anthony Lim

Anthony Lim believes that nothing is better than a good smoke and a car with character, with good handling aspects being top of the prize heap. Having spent more than a decade and a half with an English tabloid daily never being able to grasp the meaning of brevity or being succinct, he wags his tail furiously at the idea of waffling - in greater detail - about cars and all their intrinsic peculiarities here.

 

Comments

  • AutoFrenz (the original) on Mar 17, 2021 at 1:41 pm

    This is like doing a favor to tesla and penalising toyota…very 3rd world mentality…why cant they coexist…

    Like or Dislike: Thumb up 29 Thumb down 0
  • B20 mandate in Indonesia?

    Like or Dislike: Thumb up 0 Thumb down 0
  • Aikon on Mar 17, 2021 at 3:20 pm

    Daihatsu Sirion aka Myvi is ICE so no problem.

    Like or Dislike: Thumb up 4 Thumb down 1
  • Calvin on Mar 17, 2021 at 6:02 pm

    Pushing for higher adoption by raising taxes eh? They must have learnt this from Malaysia where people complain of higher car taxes but yet lead to ever highest car ownership per capita in SEA.

    This is the bait & switch tactic, draw all the investment in then raise taxes on them. They forget that car making setup takes a long time and in between they can suddenly pull out just see Dyson car project in Singapore.

    Whatever weakness it is, our policy still aint as convoluted and shitty as this deal.

    Like or Dislike: Thumb up 2 Thumb down 0
  • Ahmadjr on Mar 17, 2021 at 9:28 pm

    Tesla already chose india. Now they look like to lose japan n korea carmakers

    Like or Dislike: Thumb up 1 Thumb down 0
  • neutrino on Mar 18, 2021 at 10:06 am

    EV is not the future, PHEV and hybrid is, EV is the future future.

    Like or Dislike: Thumb up 3 Thumb down 0
 

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