Electric vehicle: Strong foundation towards electrification era

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia: Kendaraan listrik: Modal kuat menuju era elektrifikasi

2 December 2019

By: Ilman A. Sudarwan and Thomas Mola

Electric vehicles are said to be the future of the national automotive sector. However, several challenges are still in the way, both in terms of regulation or supporting infrastructure readiness.

The government has re-affirmed their commitment to making Indonesia the centre for electric vehicles in Asean by 2030. Several incentives have been prepared to attract investors to develop the national electric vehicle industry.

Industry Minister Agus Gumiwang Kartasasmita said that his agency would ask vehicle producers to produce electric vehicles in Indonesia.

“We have an ambition to make Indonesia the centre [for electric vehicles] by 2030, as well as becoming the producer for Asean area. Hence, we will talk with producers to carry out production in Indonesia. We have many superiorities, so we must be sure that this can be realised by 2030,” he said in Jakarta last week.

Not only commitment, the government has prepared several regulations to support electric vehicle development in Indonesia. In August, Presidential Regulation Number 55 of 2019 on Acceleration of the Battery Electric Vehicle Program for Road Transportation was issued as the gateway to the electric vehicle era.

However, this regulation cannot stand on its own as it needs other derivative regulations, which can be an implementation or a technical guideline from Presidential Regulation Number 55 of 2019. The Ministry has 1 year until August 2020 to issue the guideline.

Besides the previous regulation, the government has also issued Government Regulation Number 73 of 2019 on Luxury Taxable Goods in the Form of Motor Vehicles Subject to Sales Tax on Luxury Goods (PPnBM). The regulation will adjust the PPnBM for electric vehicles and electrified vehicles.

Metal, Machinery, Transportation Equipment and Electronic Industry Director General of the Industry Ministry Harjanto said that his company had a draft of the guideline to be discussed with industry players.

“I am trying [to issue the guideline] this year, or next year if it is impossible. It has been prepared as a draft. It only needs to be discussed, but we have not found the right time, so we just have to discuss it article by article,” he said to Bisnis.

Unfortunately, approaching the end of 2019, there has yet to be a sign that the regulation has been discussed with the industry players. Meanwhile, the regulation is crucial for electric vehicle industry development in Indonesia.

In line with Presidential Regulation Number 55 of 2019, electric vehicle development in Indonesia must meet the minimum Achievement of Local Content Level (TKDN) that increases every year until 2030. From 2019 to 2023, the minimum TKDN is 35%.

This condition must be fulfilled if producers want to receive the tax incentive that is stated in Presidential Regulation Number 73 of 2019. The government will allow 15% PPnBM and 0% tax imposition on the selling price starting from 2021. This regulation is also a fiscal incentive that is mentioned in Presidential Regulation Number 55 of 2019.

The TKDN regulation that can be set as a guideline is the one stated in Presidential Regulation Number 55 of 2019. In article 1 chapter 12, TKDN is mentioned as the total amount of domestic content in goods, services, as well as goods and services.

Administration Director of the Cooperation and External Affairs of PT Toyota Motor Manufacturing Indonesia (TMMIN) Bob Azam said that there were still around two years left to prepare for the electric vehicle era. He hopes that the guideline and the clear TKDN regulation can guide industry players to the era.

“The important thing is that we can implement the guideline because we have created many good regulations, but they cannot be implemented. We hope that this regulation can guide us and provide a large space for dialog,” he said.

Besides TKDN, there are still other regulations that must be issued by the related ministries, including regulation on the import of completely knocked down and incompletely knocked down vehicles from the Industry Ministry, the fiscal and non-fiscal incentives for investments by battery electric vehicle companies from the Finance Ministry, and the electricity tariff to charge the battery of electric vehicles from the Energy and Mineral Resources Ministry.

Infrastructure

The importance of derivative regulations was stated by TMMIN President Director Warih Andang Tjahjono during a meeting between Toyota Motor Co and the Transportation Ministry. According to him, the presidential regulation has always been appropriate, and it just has to be translated into a technical regulation.

On the other hand, he also highlighted the availability of supporting infrastructures and local industry supply chain to develop the electric vehicle industry, which must be coupled with education and socialisation to make electric vehicles more acceptable by the public.

“These challenges must be tackled. The government continues to prepare, and we [as the industry] introduces and educates the public to experience and favour electric vehicles,” he said.

Meanwhile, Chairman of the Board of Representative Executive Officers of Mitsubishi Motors Corporation Osamu Masuko said that infrastructure was crucial to develop electric vehicles. According to him, the government must pay extra attention to it.

“This is crucial. Besides infrastructure, the battery for the electric vehicles is also an issue. This is an important factor. Vehicle production is not hard as we are experienced,” Masuko said.

Next article: Public Works and Housing boosts PDAM expanding drinking water service

Previous