Indonesia's electric vehicle (EV) industry is awaiting clarity on the future of government incentives, as policymakers continue discussions on a revised support framework that could be linked to the country's broader national electric vehicle manufacturing strategy.

The uncertainty has prompted concerns among automotive industry stakeholders, who warn that delays in announcing the policy could affect EV sales and consumer purchasing decisions during the second half of 2026. Head of the Battery-Based Electric Vehicle Industry Working Team (KBLBB) at the Ministry of Industry (Kemenperin), Patia Junjungan Monangdo, said that discussions on EV incentives are continuing across multiple ministries and that no final decision has been reached.

"We're still waiting for direction from our leadership regarding this incentive. Hopefully, we'll have information soon," Patia said.

The government had initially planned to announce the revised EV incentive policy in June 2026. However, by mid-July, the regulation had yet to be issued, as discussions continued, with authorities prioritising deliberations on the national vehicle development programme and evaluating fiscal readiness.

Incentives to be aligned with national EV strategy

Coordinating Minister for Economic Affairs Airlangga Hartarto said that the government intends to align future EV incentives with a broader national strategy for the development of domestically produced electric cars and two-wheelers. Speaking in Jakarta, Airlangga said that ongoing discussions are assessing whether consumer subsidies should be directly linked to the national car or national two-wheeler programme while also strengthening Indonesia's domestic EV supply chain.

"We will see whether this is linked to the national car or national two-wheeler programme," he said.

Although the final incentive mechanism and implementation timeline have yet to be confirmed, Airlangga said that incentives for the EV industry will continue as part of the government's EV development strategy.

President Prabowo Subianto is also expected to launch Indonesia's national electric vehicle programme in the near future. When asked whether incentives would be directed towards consumers purchasing nationally developed EVs or manufacturers producing them, Airlangga did not provide further details, stating only that the policy would relate to national electric cars and two-wheelers.

Finance Minister Purbaya Yudhi Sadewa also confirmed that government support for the EV industry will continue, although the distribution mechanism will be revised. According to Purbaya, incentives for electric two-wheelers will remain available but will be channelled through selected companies rather than under the previous scheme.

He further added that the government is awaiting recommendations from the Ministry of Industry and Danantara regarding which companies will receive support, as both institutions are responsible for determining the direction of subsidies for electric cars and two-wheelers. Under the proposed framework, electric two-wheelers are expected to receive incentives of IDR 5 million (US$ 310) per unit, while the subsidy level for electric cars remains under evaluation.

Industry calls for policy certainty

Automakers said that the prolonged uncertainty is affecting the market. Changan Indonesia Head of Marketing Ridjal Mulyadi said that some consumers are postponing purchases while awaiting confirmation of the government's policy, making it difficult for manufacturers to develop pricing, sales and marketing strategies.

"There are a number of consumers who are choosing to wait for confirmation from the government. As industry players, we can only wait for these incentives," Ridjal said.

According to Ridjal, growth in the EV market depends not only on consumer purchasing power but also on clear and consistent government policy.

"We certainly hope the incentives remain in place. This policy will provide certainty regarding vehicle selling prices and accelerate the adoption of electric vehicles in Indonesia," he said.

Changan currently markets the Deepal S05 in Indonesia with both battery electric vehicle (BEV) and range-extended electric vehicle (REEV) powertrains. The REEV version combines an electric motor with an internal combustion engine that functions solely as a generator to recharge the battery rather than drive the wheels. Ridjal further added that the Deepal S05 is currently imported as a completely built-up (CBU) model from Thailand, while the Lumin and Deepal S07 are assembled locally at Indomobil's National Assemblers (NA) facility in Purwakarta, West Java.

Hyundai continues expansion despite uncertainty

Despite the lack of clarity regarding incentives, Hyundai Motors Indonesia (HMID) said that it remains committed to expanding its product portfolio. The company will showcase several new models at the 2026 Gaikindo Indonesia International Auto Show (GIIAS), which will be held at ICE BSD City in Tangerang from July 30th to August 9th.

HMID Chief Operating Officer Fransiscus Soerjopranoto said that Hyundai expects continued demand for mobility and is continuing product development for the Indonesian market. Among the vehicles on display will be a seven-seat EV prototype that will be produced in Indonesia. The prototype will be displayed exclusively on July 29th and 30th. Hyundai will also introduce the Ioniq 3 alongside another new model developed specifically for Indonesian consumers.

The company's display at GIIAS will include internal combustion engine (ICE), hybrid electric vehicle (HEV), and battery electric vehicle (BEV) models across the MPV and SUV segments, including the Stargazer, Staria, Palisade, Creta, and Santa Fe. However, Frans acknowledged that the automotive market still faces challenges during the second half of 2026, including Bank Indonesia's benchmark interest rate of 5.75%, a weaker rupiah trading at around IDR 17,900 per US dollar, and pressure on consumer purchasing power.

"For the second half of 2026, we see market opportunities remaining open, although the industry still faces a number of challenges, such as interest rate dynamics, rupiah exchange rate fluctuations, and consumer purchasing power, which still need to be monitored," he said.

EV market continues to expand

Despite uncertainty surrounding future incentives, Indonesia's EV market continues to expand. Data from the Association of Indonesian Automotive Industries (Gaikindo) show that battery electric vehicle (BEV) sales increased by 95.9% year on year during the first quarter of 2026. Electric two-wheelers remain the largest segment of Indonesia's EV market, accounting for approximately 65% of all electric vehicles on Indonesian roads.

Jakarta faces criticism over proposed tax changes

Separately, the Jakarta provincial government has faced criticism following indications that it may discontinue tax incentives for electric vehicles. The debate emerged after Jakarta Regional Revenue Agency (Bapenda) Head Lusiana Herawati said that the province forgoes around IDR 2 trillion annually by exempting EVs from Motor Vehicle Tax (PKB) and Vehicle Ownership Transfer Fee (BBNKB), prompting speculation that the incentives could be withdrawn.

Environmental organisation the Committee for Leaded Petrol Phase-Out (KPBB) opposed the proposal, arguing that removing EV incentives would undermine efforts to improve Jakarta's air quality. KPBB Executive Director Ahmad Safrudin said that Jakarta continues to experience high levels of air pollution. According to KPBB, air pollution has contributed to respiratory illnesses affecting 58.2% of Jakarta residents, with healthcare costs reaching IDR 59 trillion in 2025. The organisation also estimated that motor vehicle emissions generate 103.25 million tons of greenhouse gas emissions annually in the capital.

KPBB argued that maintaining incentives for low- and zero-emission vehicles is consistent with Jakarta Regional Regulation No. 2/2005 on Air Pollution Control and Governor's Decree No. 576/2023 governing the city's air pollution control strategy.

Instead of taxing EVs, the organisation proposed introducing an emissions-based tax or excise system targeting high-polluting internal combustion engine vehicles. Under the proposal, vehicles exceeding emissions limits would be subject to additional taxes or penalties, while cleaner vehicles would continue to receive incentives based on the amount of emissions reduced below regulatory thresholds.

KPBB estimates that such a scheme could generate up to IDR 5.7 trillion in additional regional revenue, compared with the IDR 2 trillion the provincial government expects to recover by removing EV tax exemptions.

"Through an emissions excise scheme, environmentally friendly vehicles will continue to be attractive to the public without causing the provincial government to lose regional revenue. It is ironic if the government seeks tax revenue from electric vehicles that help address the air pollution crisis instead of taxing the actual sources of pollution," Ahmad Safrudin said.