2026 Marks a Turning Point for Indonesia’s Electric Vehicle Industry: From Imports to Local Production
Bandung, West Java – Indonesia is stepping up efforts to strengthen its electric vehicle (EV) ecosystem by encouraging global automakers to shift toward local production rather than relying solely on imported fully built vehicles. This move comes ahead of the planned expiration of incentives for imported EVs and forms part of the government’s strategy to position Indonesia as a regional EV hub in Southeast Asia.
Starting January 1, 2026, the government will remove tax incentives for fully built imported EVs (CBU) and replace them with policies that grant tax relief only to EVs produced or assembled domestically and meeting a minimum Local Content Requirement (TKDN) of 40 percent. The policy is expected to push automakers to invest in local manufacturing facilities in order to keep prices competitive.
Deputy Coordinating Minister for Infrastructure and Regional Development, Muhammad Rachmat Kaimuddin, said manufacturers that do not establish production facilities in Indonesia will face higher import tariffs beginning in 2026. Conversely, automakers that partner with local assemblers or build their own plants will be eligible for tax incentives, provided they meet production commitments.
So far, nine global brands have committed to local production in Indonesia, including Geely, BYD, Citroën, VinFast, GWM, Volkswagen, Xpeng, Maxus, and AION. Of these, seven—VinFast, Volkswagen, BYD, Citroën, AION, Maxus, and Geely—have already begun operating production or assembly facilities in the country.
The policy aligns with the government’s goal of strengthening the domestic automotive value chain and attracting long-term investment. With abundant strategic mineral resources such as nickel—a key material for EV batteries—Indonesia aims to maximize the benefits of the global EV boom and shift its focus from imports toward sustainable local production.
Expert Analysis:
Industry observers believe this policy will help accelerate EV production in Indonesia from 2026 onward, while also opening up new employment opportunities in electric vehicle component manufacturing. Although challenges remain in strengthening local parts supply and component ecosystems, consistent policy support is seen as a key driver in speeding up the transformation of Indonesia’s automotive industry.
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