The Indonesian government regulations regarding the provision of incentives for electric car buyers are estimated to increase the probability of people buying electric vehicles by three-fold. However, the government needs to focus on important aspects to drive investors.
Providing incentives and infrastructure is part of the government’s program to accelerate the use of electric vehicles in Indonesia. In addition, the government has provided subsidies and incentives to benefit electric car users.
According to Luhut Binsar Pandjaitan, the Coordinating Minister for Maritime Affairs and Investment, apart from encouraging people to buy electric vehicles, the incentive and subsidy also aim to develop the electric vehicle ecosystem in Indonesia. The incentive is also expected to attract more investment to Indonesia to support development.
He also added that the incentive program will help Indonesia to shift from imported fossil fuels in order to strengthen Indonesia’s trade balance.
“If we succeed in electrifying our transportation, Indonesia can achieve its emission reduction target and create a better environment,” said Pandjaitan.
In response to government policies, Krisna Gupta, partner researcher at the Center for Indonesian Policy Studies explained that the Indonesian government needs to set clear goals regarding the desired outcomes of these incentives.
Providing incentives will encourage people to buy electric vehicles and attract more investment. However, Gupta commented that it is better to focus on export-oriented investors.
Focusing on investment in the export sector is better because demand for electric vehicles in Indonesia is still relatively lagging compared to foreign countries. “The government’s policy goals need to be finalized because investors see the greater magnitude of the global market. The global market has reached 8 million [electric vehicles]. Investment can enter if the orientation is export,” said Gupta.
The Minister of Finance Regulation No. 38 of 2023 is predicted to affect consumer purchasing patterns because the value of VAT stated in the Regulation for electric vehicles is only 1 %. This changes consumers’ assessment of the price of electric cars which were previously considered uncompetitive compared to conventional fossil fuel cars.
Albert Hasudungan, Head of Laboratory of the School of Economics and Business at Prasetiya Mulya University, said that in a survey involving 121 respondents who had paid a down payment or signed an agreement to buy an electric car, the incentives provided by the government had affected the decision of a person to buy an electric car.
“Government regulations in providing incentives related to electric cars, based on our research, increase the probability of people buying electric cars up to 2.7 to 2.9 times. When deciding to buy [an electric car], consumers will compare the prices of electric cars with gas-fueled cars,” said Hasudungan on April 24, 2023.
Meanwhile, government policies concerning battery charging infrastructure are still centered on big cities only. To ensure a smooth transition to electric vehicles, the government must also ensure the availability of infrastructure, such as charging stations for public electric vehicles.
According to Kompas Research and Development (Litbang Kompas), the market share of electric car sales in the emission scenario will reach 4.3% in 2020, and is expected to rise to 25% in 2025. Meanwhile, in 2030, it is estimated that it has the potential to touch 60.9%.
In addition, the ongoing trend of electric vehicles has started to make changes to the business model for public refueling stations in Indonesia, especially in big cities. According to Hasudungan, their business model will develop into a place for leisure activities as a waiting facility for charging electric vehicle batteries, which takes 1 to 5 hours.
