Fiscal Threats Amid Oil Price Surge: EV Incentives Needed to Stabilise the Market?

The government is assessed to need reactivating electric vehicle (EV) incentives to dampen fiscal pressures resulting from the rise in global oil prices. Head of the Macroeconomic and Finance Centre at the Institute for Development of Economics and Finance (INDEF), M. Rizal Taufikurahman, believes that without further stimulus, EV adoption risks slowing, especially in the middle-class segment. “This risk of slowdown is quite real, particularly after the fiscal incentives end in 2025, causing EV prices to become more expensive and people’s purchasing power to narrow,” he said in a written statement on Thursday (2/4/2026). Rizal assesses that external pressures further strengthen the urgency of the policy. Geopolitical tensions between the United States, Israel, and Iran are keeping Brent crude oil prices above 100 US dollars per barrel. “This condition has the potential to increase the energy subsidy burden in the State Revenue and Expenditure Budget (APBN),” he added. Energy subsidy allocation in 2026 is estimated to reach around Rp 210 trillion. This budget is sensitive to oil price movements. A rise of 1 US dollar per barrel adds to the fiscal burden by around Rp 6 trillion to Rp 7 trillion. A rise of 10 US dollars per barrel could potentially add to the subsidy burden by Rp 60 trillion to Rp 70 trillion. The sustainability of incentives is also seen as determining the acceleration of energy transition in the transportation sector and medium-term fiscal stability. “In energy transition simulations, replacing 1 million conventional vehicles with electric vehicles has the potential to save around 13 million barrels of oil per year. This is a significant saving and has a direct impact on the national energy balance,” he stated. Previously, Minister of Industry Agus Gumiwang Kartasasmita stated that EV import incentives in the form of completely built up (CBU) vehicles will not be extended. The import duty exemption and Luxury Goods Sales Tax (PPnBM) facilities end on 31 December 2025.