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Electric cars way of future

15 March 2019

Presidential regulation prepared to incentivize electric vehicle production

Regulation, adjusted tax to help RI compete with neighboring countries: Minister

The government has said that Indonesia has the potential to become an exporter of electric vehicles in the future, even though regulations on the industry are not yet in place and production will not begin anytime soon.

A proposed presidential regulation (Perpres) on electric vehicles (EVs) is the main reason for the government having such a dream. The upcoming regulation will incentivize the use of EVs by changing the luxury goods tax (PPnBM) calculation for vehicles so that it is based on carbon emissions rather than engine capacity.

The Finance Ministry and Industry Ministry brought the proposal to the House of Representatives earlier this week, saying that it would spur the country’s automotive exports.

Industry Minister Airlangga Hartarto said on Wednesday the regulation was expected to be established by the end of the first half of 2019. Its implementation and the subsequent commercial production of EVs, meanwhile, were targeted to begin in 2021.

The two-year gap, said Airlangga, gives automakers time to prepare, as Japanese and European manufacturers, which dominated Indonesia’s automotive market, had agreed to the transition period.

“We aim to manufacture 400,000 electric vehicles in 2025, which is about 20 percent of the overall installed vehicle production capacity,” Airlangga said on the sidelines of a Trade Ministry meeting. “We are encouraging any investments that can support this export-oriented policy.”

The automotive sector is one of the priority sectors in Indonesia, contributing 10 percent to gross domestic product (GDP) in 2018.

However, both domestic and foreign sales of Indonesian automotive vehicles have stagnated over the past several years for various reasons, such as a lack of vehicle variety, fiscal constraints and an inability to meet higher international standards.

This year, the Association of Indonesian Automotive Manufacturers (Gaikindo) has set a sales target of 1.1 million units. It is unchanged from the 2018 target and is even lower than that year’s sales of 1.15 million units.

Gaikindo did not reveal its export target this year but pointed that the exports of completely built-up (CBU) vehicles had increased by 14.4 percent to 264,553 units in 2018.

With the presidential regulation and adjusted luxury cars tax, Indonesia would be able to compete with neighboring countries that also produced EVs, such as Thailand, which had already ratified a trade agreement with Australia, India and Japan, said Airlangga.

He mentioned the recent signing of the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), saying it could provide Indonesia access to Australia’s vehicle market of 1.2 million units per year.

“Automotive vehicles could be our top export to Australia, because they have a market of 1.2 million cars but they have closed down all of their automotive manufacturers […] as they were not profitable enough,” he said.

Additionally, the planned reg- ulation would stipulate a 35 percent local content requirement for locally made EVs.

Therefore, said Airlangga, his office would ensure the availability of industries that supported the production of EVs, such as batteries and electric motors.

Finance Minister Sri Mulyani Indrawati refrained from confirming whether the regulation would be issued soon.

“We have consulted the House so we will wait and see what happens,” Sri Mulyani said separately. “We will surely take into account the feedback from the lawmakers and industrial [players] regarding this tax.”

Gaikindo chairman Yohannes Nangoi said automakers had acknowledged the importance of advancing with EV technology and had thus appointed a new, additional cochairman in the association to oversee the matter of future technology.

“The development of automotive technology, ranging from hybrid, plug-in hybrid and electric [vehicles], is going rapidly, and Gaikindo believes it is necessary to keep on delving into these future technologies and get Indonesia ready to partake in it,” Yohannes said in a recent statement.

Source: Jakarta Post, 15 March 2019