Incentive to Popularize Electric Vehicles

Kompas/Priyombodo

A taxi driver stops by to charge his vehicle on Friday (30/8/2019) at the E-Bluebird fleet hub in Jakarta. The use of electric vehicles is expected to continue to grow along with the promulgation of Presidential Regulation No. 55/2019 on accelerating the nation’s battery electric vehicle (BEV) program.

The government has moved quickly to boost the domestic market for electric vehicles. Incentives are being prepared for consumers to switch to electric vehicles and have also been given to producers to boost independent domestic production.

The policies to increase the market penetration of battery-powered cars are part of an effort to turn Indonesia into a global hub for such vehicles. At least, the country aims to be a basis for electric vehicle production in Southeast Asia.

Indonesia is ASEAN’s largest automotive market, with a market share of around 32 percent (2018). In 2019, no fewer than 1 million new cars were sold. Export opportunities are wide open to enter the automotive markets of other countries.

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With a huge population, Indonesia has a high need for motored vehicles to support people’s movement. However, car ownership in the country remains low compared to other ASEAN countries at only 87 cars per 1,000 people. This is far lower than Brunei Darussalam (711), Malaysia (439), Thailand (228) and Singapore (147).

As for production, Indonesia can develop its automotive industry starting from battery components as the main factor in developing electric vehicles. Indonesia has ample resources of nickel ore that can be processed into lithium battery.

Kompas

Car Sales (Penjualan Mobil) and Car Ownership Ratio (Rasio Kepemilikan Mobil) in ASEAN.

As for the legal umbrella for electric vehicle development, the government has issued Presidential Regulation (Perpres) No. 55/2019  on the acceleration of battery-powered electric vehicles.

The regulation cites that acceleration efforts include developing an electric vehicle industry, providing incentives, establishing the charging infrastructure and regulating electricity prices for electric vehicles. Electric vehicles must meet certain technical requirements, including environment requirements.

This is because they produce battery waste that is environmentally hazardous, which necessitates technological research and development and the standardization of electrical vehicles.

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Considering that much work needs to be done to accelerate the program, the government has delegated tasks and authorities to numerous entities. At least eight ministries are involved in pushing on the electric vehicle program.

The Industry Ministry, for instance, is tasked with preparing a road map. The Finance Ministry, meanwhile, prepares the fiscal incentives and the Environment and Forestry Ministry takes care of battery waste. The Office of the Coordinating Maritime Affairs and Investment Minister serves as inter-ministerial coordinator. The General National Energy Plan (RUEN)  cites that the government hopes for 2,200 electric cars and 2.13 million electric motorbikes to be on the roads in 2025. This means, that 440 electric cars and 426,000 electric motorbikes must be made available every year.

KOMPAS/HARRY SUSILO

A man heads towards a reserved parking space for Viar Q1 electric motorcycles on Friday (27/7/2018) at the Viar Motor Indonesia office in North Jakarta. Viar Motor Indonesia started manufacturing the 2 kWh electric motorcycle in August 2017.

To reach this target, electric vehicles are imported completely built up (CBU) and then assembled domestically, both as completely knock-down (CKD) and incompletely knock-down (IKD) products with the inclusions of local components.

Industry incentives The Covid-19 pandemic  is a hurdle in reaching the electric vehicle target. People’s purchasing power has been affected by the economic slowdown, which poses a unique challenge. Many will delay fulfilling non-daily or non-urgent needs, including personal vehicles.

Only a huge incentive may sway consumers, especially those from the upper middle class, to switch to electrical vehicles. Moreover, incentives may also facilitate the automotive industry to produce electric vehicles.

Industry incentives The Covid-19 pandemic  is a hurdle in reaching the electric vehicle target.

The government is currently preparing several incentives. The prevailing fiscal incentive include the zero-percent luxury tax (PPnBM) for electric vehicle companies taking part in the electric car development program. This incentive is stipulated in Government Regulation (PP) No. 73/2019.

Perpres No, 55/2019 stipulates several facilitations for the electric vehicle industry, which will need to import CBU vehicles for a certain period and amount.

DOKUMENTASI PRIBADI

The Arjuna electric car team from Gadjah Mada University won four titles in the virtual competition for the 4th Annual Formula Student Electric Vehicle (FSEV) Concept Challenge 2020 in India.

However, the Financial Ministry is still waiting for a regulation on tax subjects allowed to import CBU electric vehicles within a quota and time period set by technical ministries.

Facilities provided include an import duty incentive for importing electric vehicles both as CKD and IKD. Regarding this, the Financial Ministry has requested that the Industry Ministry immediately prepare a ministerial regulation on the schemes to import CBU, CKD and IKD electric vehicles. This will also help the Financial Ministry expedite the preparation of a ministerial regulation on relevant fiscal policies.

There will also be import duty incentives for the import of machines, goods and materials for the sake of investment. Fiscal incentives will also be provided for research, development and innovation and vocational training for the electric vehicles components industry.

Perpres No. 55/2019 also stipulates non-fiscal incentives for the development of electric vehicles. The non-fiscal incentives come in the form of exemptions from road use limits and the right to produce technologies related to electric vehicles under patent licenses held by the central or regional governments.

This includes training to secure operational activities in industries to ensure smooth logistical or production activities for companies in certain industries seen as vital.

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KOMPAS/RADITYA HELABUMI

Prototype electric vehicles, including an electric scooter and an electric multipurpose vehicle, are displayed on Tuesday (28/8/2018) at the Agency for the Assessment and Application of Technology (BPPT) in Jakarta. The BPPT is improving its development tests on electric cars and motorcycles, as well as on charging stations, chargers and batteries. The domestic manufacturing industry will also be involved in supplying components.

Incentives for consumers

Incentives are also being prepared for consumers of electric vehicles, including access to credit for electric vehicles and charging fee waivers at electric vehicle charging stations provided by state electricity company PT PLN.

Several banks are prepared to provide electric vehicle ownership credit schemes. State lender Bank Rakyat Indonesia (BRI), for instance, provides a special credit scheme for electric vehicle purchase with an annual interest rate of 3.8 percent and a six-year tenor.

The domestic automotive industry has slowed down as people’s purchasing power decreases.

Furthermore, provinces also provide incentives for the ownership transfer fee on electric vehicles. The Jakarta administration, for instance, has Gubernatorial Regulation No. 3/2020 that exempts electric vehicles from the motor vehicle ownership transfer fee and private vehicle limits.

Meanwhile, several other provinces have reduced vehicle ownership transfer fees and taxes, namely at around 10 percent for electric cars and 2.5 percent for electric motorbikes.

Such incentives for the electric vehicle industry and consumers must still go through prolonged discussions. The transition toward reaching the 2025 target amid the ongoing pandemic will not be easy. In general, the economy is not in a good state. Meanwhile, the domestic automotive industry has slowed down as people’s purchasing power decreases. Car sales in Indonesia are estimated to decline by around 40 percent this year.

(KOMPAS R&D)