With aims to boost sales of electric vehicles, Indonesia announces a new regulation that will increase tariffs for hybrid cars.
According to Bloomberg's report, this is how the new tax structure will look like:
| Revised tax structure | |
|---|---|
| Vehicle type | New tax rate |
| Battery-powered electric vehicles (BEV) |
0% (unchanged) |
| Plug-in hybrid vehicles |
5% (up from 0%) |
| Full and mild hybrid vehicles |
6% - 12% (up from 2% - 12%) |
Higher rates will be introduced in two years, after the battery-powered EV sector realises investments of IDR 5 trillion (~ MYR 1.5 billion), or when it starts commercial production with an investment of the same amount.
After this, tax rates for plug-in hybrids will be jacked up to 8%, and regular hybrids will see a tariff range of 10%-14%.
This development is the latest in a series of initiatives that the archipelago has rolled out in recent times in their quest to become the world's EV battery hub.
Beyond this new regulation, the country also wants to expand beyond its current role of being a major nickel supplier - used in the batteries - to producing other components for such vehicles.
Also read: Battery giant CATL plans USD 5 bil investment in Indonesia, lithium-ion battery production to start in 2024
Shift towards BEVs
While Indonesia has been attracting the attention of major automakers (like Toyota and Tesla), this regulation is also part of the government's efforts to increase EV adoption there.
Also read: Tesla to visit Indonesia in Jan 2021 for possible EV investment - new gigafactory?
Typically, normal and hybrid cars remain cheaper, which makes them more of a natural favourite. Industry data shows that only 120 EVs were sold there last year, roughly a tenth of hybrids sold.
Also read: 10 new Toyota EVs heading to Indonesia by 2025, plus USD 2b investment
“Indonesia can have more opportunities to become a big player in electric vehicles,” said Febrio Kacaribu, head of fiscal policy at the Finance Ministry. “Battery-powered EVs have more impact to reduce gas emissions rather than hybrid ones.”
Nearly 30% of the country's total emissions come from their transport sector and rather unsurprisingly, land transport makes up a majority of it. However, Indonesia has committed to reduce its emissions by at least 29% by 2030, under the Paris Agreement.
Also read: While Malaysia dithers, Thailand and Indonesia have overtaken Malaysia in EV race
