Industry players have responded to plans to reinstate purchasing subsidies for electric two-wheelers, as the government seeks to reduce reliance on imported fossil fuels that have become increasingly costly amid ongoing tensions in West Asia.

The chairman of the Indonesian Electric Motorcycle Industry Association (Aismoli), Budi Setiadi, stated that the plan had been introduced at this stage. The policy could help "reduce pollution and emissions" and lower budgetary expenditure on fuel subsidies, Budi told the media on April 27th.

The US-Israeli war against Iran has driven global oil prices higher, requiring the government to allocate additional funds to maintain stable pump prices for subsidised fuels. Large volumes of diesel and petrol are sold at fixed prices that are typically lower than global benchmarks, with the state covering the difference through energy subsidies and compensation to state-owned companies Pertamina and PLN.

"If the number of vehicles keeps growing, so does the subsidy [bill for the government]," Budi noted, adding that subsidies for electric vehicle (EV) purchases could help reduce subsidy expenditure in the short term.

The 2026 budget plan is based on an assumed global oil price averaging US$ 70 per barrel and an exchange rate of approximately IDR 16,700 per US dollar. However, with oil prices currently exceeding US$ 100 and the rupiah weakening beyond IDR 17,000, fiscal calculations are under strain.

Approximately one week after the first missiles in the Iran war were launched on February 28th, the government stated that it aimed to accelerate the energy transition by expanding solar power generation capacity and converting a portion of the country's two-wheelers from internal combustion engines to battery-powered alternatives.

Finance Minister Purbaya Yudhi Sadewa stated on April 24th that the latest proposal involved the state covering IDR 5 million (US$ 290) per purchase of EV two-wheelers this year. He stated that the target would be achieved gradually, although no specific timeline was provided.

However, he added that these figures had yet to be finalised, as the regulation governing the policy was still under formulation, with input from the Industry Ministry and the Office of the Coordinating Economy Minister. Industry Minister Agus Gumiwang Kartasasmita stated on Tuesday that technical teams from both ministries were working to finalise the details.

He stated that IDR 5 million per unit "was a good position" to begin with but did not specify the number of units that would be covered. He explained that the final figures would depend on the subsidy allocation approved by the Finance Minister, which would be outlined in a Finance Ministry regulation. When asked whether EV cars would also be subsidised, Agus stated, "it's a must; all [vehicles] will be EV-based", adding that earlier EV transition programmes had been designed within an "emission reduction framework, which is still important".

"However, now, with the experience of the [Strait of] Hormuz disruption, the programme can be linked to energy security, which is probably more imperative. Energy security reduces dependence on fuel imports." He described the subsidy plan as "a signal from the government to the market".

In 2023 and 2024, under the previous presidential administration, the government introduced similar policies that included tax incentives for electric car owners, alongside a consumer subsidy of IDR 7 million per electric two-wheeler purchase. The programme formed part of a broader strategy to advance Indonesia's position in the global transition towards EVs, supported by a downstream industry roadmap based on the country's nickel reserves, a key material used in the production of EV batteries, particularly in the high-end segment.

Electric two-wheeler sales increased in 2023 and 2024 compared with the previous two years combined. However, sales declined in the following year after the subsidy programme ended.

Budi, who attended a meeting with the Industry Ministry to discuss this year's subsidy plan, stated that the government had set a target for 2026. He stated that member companies within the association had the capacity to produce vehicles annually if required. He added that previous EV two-wheeler subsidies had initially been restricted to low-income buyers, resulting in delays due to verification processes. He suggested that the new policy should be made immediately applicable to all buyers in order to meet the one-year sales target and recommended extending the programme to a three-year period.