Indonesia Automotive Outlook 2025: Government Incentives Drive EV Adoption

Jakarta, VIVA – Indonesia's automotive market is currently transitioning towards an electrified era, in line with the government's goal of achieving Net Zero Emissions (NZE) by 2060.

To achieve this target, the government continues to encourage the adoption of electric vehicles (EVs) through various incentive policies.

Recently, several incentives have been provided for the automotive industry.

Firstly, a value-added tax on a deferred basis (PPN DTP) incentive of 10 percent for EVs with a domestic component level (TKDN) value of at least 40 percent, as well as a 5 percent incentive for the delivery of certain EV buses with a TKDN value of at least 20 percent up to less than 40 percent.

Secondly, a luxury goods value-added tax on a deferred basis (PPnBM DTP) incentive for EVs of 100 percentfor the import of certain battery-based electric motor vehicles (KBLBB) with four wheels in a completely built-up (CBU) condition and the delivery of certain four-wheeled KBLBB originating from domestic products (completely knocked down/CKD).

Thirdly, a PPnBM DTP incentive of 3 percent for hybrid motor vehicles. Lastly, a 0 percent import duty exemption incentive for CBU EVs.

The presence of various incentives has been able to change consumer preferences and the industry landscape.

Initially, conventional internal combustion engine (ICE) vehicles, especially non-LCGC (Low Cost Green Car), consistently dominated the market but are now showing signs of decline. This is due to the increasing popularity of electrified vehicles.

As quoted by VIVA from Indonesia Automotive Outlook 2025: Ending the One Million Trap, Embracing the Low Emission Era by VIVA.co.id, in 2019, non-LCGC ICE vehicles recorded sales of 814,641 units, representing 78.9 percent of the market share.

This dominance persisted until 2020 and 2021, with market share peaking at 83.1 percent in 2021, when the economy began to recover from the pandemic.

However, in 2023, the market share of this segment declined to 72.6  and a further decline to 67.7 percent was seen in the year-to-date (YTD) 2024 data.

Meanwhile, electric car sales have seen a significant increase. From almost no sales in 2019 and 2020, electric cars experienced exponential growth, with sales increasing from 125 units in 2020 to 31,994 units in 2024.

This growth reflects an increase in market share from almost zero in 2019 to 4.5 percent in 2024. The government's push for EV adoption, coupled with increasing consumer interest in sustainable mobility, has driven this remarkable expansion.

In addition to electric cars, Hybrid Electric Vehicles (HEVs) have also emerged as key players in the Indonesian automotive market, offering a transitional solution for consumers who are reluctant to fully switch to BEVs.

Hybrid sales have grown steadily from 787 units in 2019 to 54,179 units in 2023, with 2024 sales reaching 47,955 units.

HEV market share has increased from just 0.1 percent in 2019 to 6.8 percent in 2024, confirming its growing popularity and role in the Indonesian automotive landscape.

As a transitional technology, HEVs offer benefits such as better fuel efficiency and reduced emissions, while also addressing concerns about charging infrastructure and the higher initial cost of BEVs.

The gradual shift towards HEVs is an important step in the overall transition towards a more sustainable and diverse automotive industry in Indonesia.