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EV Incentive Policies: Prosperous or Misfortune?

The government officially issued regulations for assisting with purchasing Battery-Based Electric Motorized Vehicles (KBLBB) specifically for electric cars and motorcycles with a minimum domestic component level (TKDN) of 40%, which will take effect on March 20, 2023. This incentive program is geared towards manufacturers, retailers, and individuals as part of efforts to increase sales, accelerate adoption, and attract investment in electric vehicles (EVs). Furthermore, this marks a new chapter in the government's seriousness in reducing dependence on fossil fuels, and reducing carbon emissions. Within 2023, the subsidy program is estimated to be worth US$110 million, requiring a quota of 200,000 electric motorcycles and 35,900 electric cars and covering the conversion of 50,000 combustion engine motorcycles, from the requirements set for TKDN; as of now, only two automakers fulfilled the requirement, namely Wuling with Air EV and Hyundai with Ioniq 5. Meanwhile, there are three two-wheeled vehicle manufacturers: Volta, Gesit, and Selis. According to Reuters on Monday (3/6), Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said the government has been in discussions with multiple international car manufacturers and is looking to meet with Tesla in the upcoming days, as Elon Musk’s EV maker is intending to construct a factory in Indonesia with the capacity of rolling out 1 million vehicles annually.

As the government encouraged the public to use Electrical Vehicles (EVs), this has caught the attention of other parties. Pandu Sjahrir, Founding Partner of AC Ventures, conveyed that the incentive given remained positive as it will accelerate society to switch to EV. Furthermore, from an economic perspective, electric vehicles are also a positive and promising investment; thus, AC Venture will also contribute to funding electric vehicle manufacturers. The trend for EVs will occur and develop in the future. In addition, State-run electricity provider PT PLN has informed that it is focusing on setting up public electric vehicle (EV) charging stations (SPKLUs) and providing home-charging services to ensure the availability of EV infrastructure for the community. PLN is committed to accelerating the construction of supporting infrastructure for the EV ecosystem in Indonesia, in line with the government's plan to incentivize EV purchases. Based on PLN data, as of the end of 2022, it has installed 570 SPKLUs across Indonesia. The charging stations offer three types of charging services, namely, medium charging, fast charging, and ultra-fast charging. PLN is intensively constructing SPKLUs to ensure the availability of EV charging infrastructure so that the Indonesian people do not hesitate to shift to EVs, which are more environmentally friendly.

Indonesia is keen on establishing domestic EV production facilities to benefit from its plentiful nickel reserves, a vital component in battery production. This is the government commitment to reducing dependence on fossil fuels and carbon emissions. Subsidizing EVs is a standard policy across the world. However, not all of them, including the United States, are successful. Harvard University researcher Ashley Nunes pointed out this failure in a journal titled "Re-thinking Procurement Incentives for Electric Vehicles to Achieve Net-zero Emissions" (Nature, 2022). The study concluded that the US electricity subsidy policy to boost EV sales increases greenhouse gas emissions because the subsidy targets tend to be unfair and misdirected. People purchase EVs and use them as secondary cars. Meanwhile, for daily mobility, they still use gasoline or diesel cars. For lower-middle-class families, the subsidized price of EVs remains too expensive. Therefore, according to Nunes, the solution is to subsidize used vehicles that target the middle and lower classes. Or the government may also provide other options for subsidizing electric charging and vehicle maintenance costs. Reflecting on the case in the US, the Indonesian government should consider this matter to avoid being caught in a similar situation.


CNBC Indonesia



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