Jakarta – Stakeholders, including the Institute for Essential Services Reform (IESR), the International Council on Clean Transportation (ICCT) and the Electric Mobility Ecosystem Association (AEML), have highlighted the potential negative impact of the issuance of Minister of Home Affairs Regulation (Permendagri) No. 11 of 2026 on the adoption of electric vehicles in Indonesia.
At a media briefing in Jakarta on Wednesday, 6 May, speakers warned that the policy could create regulatory inconsistencies and cause uncertainty for both consumers and investors. This latest Ministerial Regulation changes the status of battery-powered electric vehicles (KBLBB), which previously automatically qualified for tax exemption, to vehicles that may be subject to taxation by local authorities.
Although the Ministry of Home Affairs has issued a circular urging governors to continue providing fiscal incentives, the final decision remains at the local level, thereby creating the potential for policy disparities between regions.
Deon Arinaldo, Director of Energy System Transition at IESR, described this situation as a form of policy “disharmony”. He emphasised that the push for electric vehicles should be strengthened, rather than being hampered by regulatory confusion. “Consistency in driving the transition to electric vehicles should actually be reinforced. However, these regulatory developments have led to confusion,” he said.
From the consumer’s perspective, changes to incentives could potentially increase the cost of owning an electric vehicle. Analysis by IESR shows that additional local taxes could increase costs by around 14% in the first year, making electric vehicles less competitive than conventional vehicles. Yet more than 85% of electric vehicle purchases in Indonesia are currently driven by government incentives.
Faris Adnan, Head of Transport Systems Technology at IESR, emphasised that policy uncertainty also affects investor interest. “From an investor’s perspective, investment becomes less attractive due to regulatory uncertainty that changes quite rapidly,” he said. He added that incentives should be viewed as a long-term investment for the country.
From a fiscal perspective, the burden of fuel subsidies remains very heavy. In his presentation, Faris stated that the government spends around Rp1.5 trillion per day on fuel subsidies and compensation. Energy subsidies surged to more than three times their previous level during the 2022–2023 energy crisis. Faris explained that, in the long term, the transition to electric vehicles could actually generate savings for the state, with potential fiscal benefits of up to tens of millions of rupiah per vehicle over a decade.
Furthermore, the development of the electric vehicle and battery industries is expected to have a significant economic impact. IESR estimates that this sector could boost economic growth by up to 0.05% per year, create around 143,000 jobs, and generate added value of hundreds of trillions of rupiah annually.
From an industry perspective, Rian Ernest, AEML Secretary-General, believes that the controversy surrounding this policy is most likely due to technical issues in the drafting of the regulations. “If we want to look on the bright side, perhaps this is simply a matter of drafting,” he said. However, he emphasised that electric vehicles are not merely a trend, but part of the national energy independence strategy.
Stakeholders agree that policy consistency is key to maintaining the momentum of the energy transition in the transport sector. Without a clear and measurable policy direction, Indonesia risks missing out on the opportunity to become a major player in the global electric vehicle and battery industry.
Looking ahead, experts recommend a combination of fiscal and non-fiscal policies, including parking incentives, exemptions from odd-even number plate restrictions, and disincentives for inefficient conventional vehicles. This integrated approach is considered essential to ensure that the uptake of electric vehicles continues to grow sustainably. (nsh)
Banner photo: Electric bus in Jakarta. 15 May, 2022. tanahair.net/nsh
