Starting on March 20, 2023, the government will provide subsidies for battery electric vehicles (BEVs), particularly electric motorcycles, to help spur the new energy automotive industry development. The subsidy is the government's first step to allowing price affordability and people's purchasing power to buy BEVs.

Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said the government had an important role in an industry. To speed up the adoption of BEVs in Indonesia, the government would need to apply a supporting policy for the program. The government's aid is expected to stimulate the electric vehicles market.

Subsidies for electric motorcycles

The government issued the Presidential Regulation (PP) No. 55/2019 on the Acceleration of Battery Electric Vehicle Program for Road Transportation. However, the policy has not been enough to boost the production and the selling of BEVs in Indonesia. The massive use of BEVs will encourage the natural sustainability by reducing greenhouse gas emission and, at the same time, leverage Indonesia’s abundant natural resources like critical minerals for electric vehicles.

"We are currently developing battery industry. Certainly, it will encourage job creation and increase our government's revenue," Luhut said during a discussion with related ministers at his office on March 6, 2023.

The Ministry of Finance Head of the Fiscal Policy Agency (BKF), Febrio Kacaribu, said the government would provide a subsidy of IDR 7 million (US$ 455) per electric motorcycle unit and has allocated the fund for the purchasing of 200,000 new electric motorcycles in 2023. The government also provides IDR 7 million subsidy for each converted fossil fuel motorcycle into electric and allocates funds for the conversion of 50,000 units.

Producers have only sold 30,800 units of electric motorbikes from 2019 to 2022, chairman of the Indonesian Electric Motorcycle Industry Association (Aismoli) Budi Setyadi said on February 23, 2023, as quoted by cnnindonesia.com.

The subsidy is prioritized for small and medium enterprises (SMEs) and household electricity consumers for 450-900 VA, which aim to buy electric motorbikes. The government hopes the subsidy will increase the productivity and efficiency of the SMEs as the industry ministry is preparing the scheme and general guidance for them.

"One of the requirements for the subsidy is that each national identity number (NIK) can't receive the subsidy twice," Kacaribu said.

Increasing electricity consumption

In his presentation to the media, Luhut took an example from the condition of Norway which became the world's top-selling electric vehicle market per capita and the experience of other countries that encourage adopting battery-based electric vehicles with various government aid. Insideevs.com reported that in 2022, more than 153,000 new plug-in electric cars were registered in Norway.

"At the same time, there is still a challenge on the significant difference of prices between environmentally friendly electric vehicles and conventional vehicles," he said. "If we see it holistically, our country is ready to compete. We have all, from upstream to downstream. We have abundant natural resources, a broad market and our human resources are full of innovation."

Luhut believed that Indonesia could compete with other countries in terms of battery electric vehicles.   

The Ministry of Energy and Mineral Resources Secretary General Rida Mulyana said that consumers could save up to IDR 2.77 million per year by using battery electric vehicles. He added that the government could save IDR 32.7 billion per year, reduce greenhouse gas by 0.03 million tons and increase job opportunities, despite the fact that there would be an increasing consumption of electricity of 15.2 GWh (gigawatt hours) per year.

"Hopefully, we can increase the adoption of battery electric vehicles massively and encourage other countries to invest in our EV industry," Luhut said. "If the government's aid run smoothly and massive adoption was realized, the EV domestic industry would be established and the price of the EV will be affordable in the future."

Editor's note: The story has been updated with additional data.