Saturday 16 December 2023

The Indonesian government gives EV brands freedom to build factories and collaborate with local assemblers and also free up import duties, however...


Indonesia is preparing towards Net Zero Emission or NZE 2060 by taking preparatory steps. Among other things, the use of environmentally friendly vehicles in the form of Electric Vehicles or EVs.

Through the use of EVs, the exhaust gas emissions that currently occur and cause various conditions such as air pollution, high carbon dioxide and carbon monoxide content, poor air quality, can be gradually reduced.

On the other hand, the Indonesian Government has also established several policies to develop the EV ecosystem and bring people closer to environmentally friendly vehicles. A number of automotive brands operating in the country have also offered discourse on finished products in the form of EV cars plus statements of support for our country’s steps towards NZE 2060.

One of the government’s policies towards automotive brands providing electric cars or EVs is the automotive industry which wants to build a car factory electricity in Indonesia is still allowed to import Completely Built-Up or CBU cars until the end of 2025. The basis is Presidential Decree Number 79 of 2023 concerning Amendments to Presidential Regulation Number 55 of 2019 concerning Acceleration of the Battery Electric Vehicle Program for Transportation Electricity.

Illustration of an electric car charging. (Unsplash/dcbel) Built-up or CBU cars themselves are products that enter Indonesia in complete form without requiring an assembling or re-assembly process when they arrive in Indonesia.

Quoted from the Antara news agency, Rachmat Kaimuddin, Deputy for Infrastructure and Transportation Coordination at the Coordinating Ministry for Maritime Affairs and Investment stated that the Indonesian Government has decided to eliminate taxes on CBU until the end of 2025. Or two years starting from 2024.

“For those who want to commit to build a factory in Indonesia, we will provide relief for two years until the end of 2025, we will provide zero percent sales tax on luxury goods (PPnBM) and import duties, however, the VAT is still 11 percent so that it is different from those inside (not included CBU) and not yet,” explained Rachmat Kaimuddin.

Even though the elimination of tax on CBU will last until the end of 2025, this does not mean that automotive brands producing EVs will only have to distribute cars. They must produce the same number of vehicles domestically as the vehicles they import. The duration is up to 2027.

If the specified target is not successfully achieved, a sanction equal to the incentive will be imposed.

“So, if they import, for example, a thousand units until 2025, they have to produce a thousand units in 2027. If they don’t have enough, they have to pay, subject to sanctions equal to the incentives we provide. “So, we can’t just pretend to be producing even though we’re not,” said Rachmat Kaimuddin.

It should also be noted that the Value Added Tax (VAT) discount from 11 percent to 1 percent also does not apply to CBU products. The reason is that the product does not meet the Domestic Component Level (TKDN) requirements according to Presidential Regulation or Presidential Decree.

On the other hand, for brands that produce vehicles domestically, the Indonesian Government is also preparing interesting policies. That is, manufacturers can not only build their own factories, but are allowed to collaborate with local assembly facilities to produce electric cars.

“In principle, in principle, TKDN must be 40 percent, so whether you build a factory or collaborate, as long as there is enough TKDN, then the workforce will be built domestically,” he concluded with an enthusiastic description of the brand of prospective factory makers in Indonesia.

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