Electric Vehicle Tax Changes: Pros and Cons of the New EV Tariff

JAKARTA – Electric vehicle policy incentives in Indonesia are beginning to change. Previously receiving various concessions, including tax exemptions in several regions, battery electric vehicles (BEVs) are no longer fully tax-free. This change coincides with the issuance of Ministry of Home Affairs Regulation Number 11 of 2026, which opens the door for the imposition of Motor Vehicle Tax (PKB) and Motor Vehicle Transfer Tax (BBNKB) on electric vehicles, with the rates left to the discretion of respective regional governments. “In principle, the imposition of tax on BEVs following the issuance of Ministry of Home Affairs Regulation No. 11 of 2026 is reasonable and merely a matter of time. Countries in Europe, the US, and even ASEAN have already implemented it. So the issue is not the decision to tax, but rather the method and timing of its application,” said Yannes to Kompas.com on Wednesday (22/4/2026). Nevertheless, he emphasised that the implementation of this policy must be accompanied by clear technical rules to avoid creating uncertainty in the market. “This policy ideally should be accompanied by clear guidelines, not left to the regions without direction, because uncertainty is detrimental to the market, industry players, and its business ecosystem,” he stated. According to Yannes, the timing of this policy is also deemed inappropriate, considering that electric vehicle adoption in Indonesia is still in the early growth stage. “The timing feels premature when EV adoption has just begun to rise,” he said. In the short term, this situation could influence consumer behaviour, particularly those buying a car for the first time and sensitive to price. “In the short term, it could certainly put the market into a wait-and-see mode, with the segment of new first-time car buyers (who are most price-sensitive) starting to be interested in entry-level EVs being the most affected,” said Yannes. Furthermore, he highlighted the potential regional-level impacts if tax policies are not uniform. Differences in rates between regions could trigger the phenomenon of “tax shopping”. “In the medium term, disparities in taxes between regions could lead to tax shopping, where consumers deliberately register their vehicles in areas with lower taxes, even though the vehicles are used daily in other regions,” he said. In the long term, Yannes warned that policy inconsistencies could affect the attractiveness of investments in the electric vehicle industry in Indonesia. With these various potential impacts, policy consistency and clarity of rules are considered key to ensuring the transition to electric vehicles continues without hindering consumer interest or the domestic investment climate.