Acceleration of Electric Vehicle Industry in Indonesia (Updated)

On August 12, 2019, the Government of Indonesia enacted Presidential Regulation No. 55 of 2019 dated August 12, 2019 on the Acceleration of Battery Electric Vehicle Program for Road Transportation (“PR 55/2019”).

PR 55/2019 was enacted as an attempt of the Indonesian Government to increase energy efficiency and energy conservation in the field of transportation, to improve the quality of air and reduce greenhouse emission in the country.

The regulation also aims to provide the long-overdue legal framework and legal certainty for the Battery-Based Electric Vehicle (“EV”) industry in Indonesia.

  • EV Criteria

Based on PR 55/2019, an EV is defined as a vehicle moved by an electric motor using electricity power from battery directly in the vehicle or from outside the vehicle.

Electric motor itself is defined as an electromechanics equipment which consumes electricity to produce mechanical energy as its driving force. Whereas, Battery is defined as the source of electricity used to supply electricity in an electric motor.

PR 55/2019 divides EV into 2 (two) main categories:

    1. two wheeled and/or three wheeled EV; and
    2. four wheeled and/or more EV.

The presidential regulation further provides that the Minister of Industry may provide further provision on the specifications of a EV.

  • EV Manufacturers

There are 2 (types) of EV manufacturers acknowledged under PR 55/2019, as follows:

    1. EV Manufacturing Company (EV Industry); and
    2. EV Components Manufacturing Company (EV Components Industry).

EV Industry and EV Components Industry may only be conducted by a company established and operated based on Indonesian law which has a Manufacturing Business License (“IUI”) to assemble and produce EV (collectively, the “Domestic EV Producers”).

The Domestic EV Producers are required to build a domestic manufacturing facility by itself or by cooperating with another manufacturing company. In the event the EV Components Manufacturing Company are not yet able to produce the main and/or the supporting components of the EV, the EV Producers may import the EV components in a Completely Knocked-Down (“CKD”) or Incompletely Knocked-Down (“IKD”) state.

Such import shall be performed by improving the gradual local content requirement by considering the ability of the domestic production.

  • Scope of Charging Facilities

The development of EV industry also depends on its supporting facilities, especially the charging facilities.

Based on the regulation, EV charging facilities consist of Charging Stations having electric power supply, control facilities for current, voltage and communication, and safety and protection system (the “Charging Stations”) and/or Battery Exchange Stations (the “BEX”).

Charging activity through Charging Stations may be done through private electricity installation or through Public Charging Stations (or SPKLU).

Electricity tariff imposed by the Charging Stations shall be determined by the Minister of Energy and Mineral Resources (“MEMR”).

A company selling electricity through Charging Station shall hold an Electricity Supply Business License (Izin Usaha Penyediaan Tenaga Listrik or “IUPTL”) and shall own an Electricity Working Area (Wilayah Usaha Penyediaan Tenaga Listrik or “WUPTL”).

Alternatively, an IUPTL holder may also cooperate with a State-Owned Company in the field of energy or other business entities to manage the Charging Stations.

As an initial attempt to start the supply of the Charging Stations, the Indonesian Government appoints PT PLN (Persero) (“PLN”) as the State-Owned Electricity Company holding an IUPTL and possessing a WUPTL in most areas in Indonesia to provide and operate the Charging Stations by cooperating with other state-owned companies or other private business entities in accordance with the prevailing regulations.

  • Local Content

Considering the current domestic capability for EV production, the Indonesian Government obliges local content requirement (Tingkat Komponen Dalam Negeri or “Local Content”) fulfillment for EV Industry and EV Components Industry gradually, based on the following schedule:

For two and/or three-wheeled EVs:

Year Local Content
2019-2023 Minimum 40%
2024-2025 Minimum 60%
2026 and further Minimum 80%

 

For four-wheeled and/or more EVs:

Year Local Content
2019-2021 Minimum 35%
2022-2023 Minimum 40%
2024-2029 Minimum 60%
2030 and further Minimum 80%

 

  • Subject of Fiscal and Non-Fiscal Incentives

In general, PR 55/2019 stipulates that the entities eligible to obtain Fiscal and Non-Fiscal Incentives are (i) the EV Manufacturing Companies, (ii) the EV Components Manufacturing Companies, (iii) Universities providing vocation programs on EV, (iv) Research and Development Institutions focusing on EV, (v) Battery-Exchange Stations Companies, (vi) Battery Waste Management Companies, (vii) EV Charging Stations Companies, (viii) Manufacturing Companies accelerating the production and preparation of EV facilities and supporting facilities, (ix) EV Public Transportation Companies, and/or (x) individuals using EVs.

  • Types of Fiscal and Non-Fiscal Incentives

The Fiscal Incentives eligible for the abovementioned entities / individuals include, among others:

    1. Exemption of customs duty for import of EV in a CKD or IKD state and for import of main components of EV for certain amount and for certain period of time;
    2. Reduction or exemption of Sale Tax on Luxurious Goods (Pajak Penjualan atas Barang Mewah or PPnBM);
    3. reduction or exemption of taxes imposed by the regional or central government, which covers the reduction or exemption of Motor Vehicle Tax and Transfer of Title Tax of Motor Vehicle;
    4. exemption of customs duty for (import of) machines, capital goods and equipment for EV investments;
    5. incentives for the production of equipment for Charging Stations;
    6. incentives for parking tariffs determined by the regional government.

In addition, the Government also provides Non-Fiscal Incentives for entities and individuals, such as (1) the exemption on the restriction to use certain roads in Indonesia, (2) the delegation of production authority for certain EV technology whose patent is possessed by the central and/or the regional government, and (3) the supervision on safety and/or operational manufacturing activity to preserve the logistic and/or production for relevant manufacturing companies considered as vital national object.

As from December 2019, the Indonesian government has issued various regulations related to EV industry and industrial and services sectors, such as the fiscal and non-fiscal incentives mentioned above, including the reduction and exemption of corporate income tax for certain period, reduction or exemption of luxurious goods tax, exemption of fees for electricity installation for charging stations, exemptions of parking fee charges for EVs, and others.

 

January 17, 2020

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