Indef Confident That Vehicle Electrification Incentives Will Drive Economic Investment

The Institute for Development of Economics and Finance (Indef) is confident that the policy of incentives for vehicle electrification, or electric vehicles (EVs), constitutes a long-term fiscal investment capable of serving as a driver of the national economy. Indef assesses that this policy not only accelerates the energy transition but also boosts economic growth and strengthens the country’s fiscal resilience. Indef Executive Director Esther Sri Astuti, contacted from Badung, Bali on Thursday, stated that the development of the electric vehicle ecosystem has demonstrated positive impacts on investment and industrial activity in Indonesia. According to her, previous government incentive policies have successfully attracted interest from global manufacturers to invest capital and establish production bases domestically. Indef records that foreign investment in Indonesia’s electric vehicle sector has reached $2.73 billion over the past three years. She further explained that the vehicle electrification incentive policy is not a loss for the state but rather a long-term fiscal efficiency investment. This is because the burden on state revenue lost due to electric vehicle tax incentives is deemed far smaller compared to the continuously swelling fuel oil (BBM) subsidies. Furthermore, the energy subsidy differential for fuel-powered vehicles could reach Rp296 trillion per year. Meanwhile, the total forgone revenue for electric vehicles is estimated at only around Rp30.4 trillion per year, or about 90 percent lower than BBM subsidies. In addition to reducing fiscal pressure, vehicle electrification is also seen as capable of delivering significant economic impacts. Indef estimates that the development of the electric vehicle industry could provide additional contributions to gross domestic product (GDP), thereby stimulating the national economy. This economic growth is expected to stem from increased domestic production of electric vehicles, reduction in imports of completely built-up (CBU) vehicles, and growth in exports of domestically produced electric vehicles. “Indeed, electric vehicles are expected to drive the automotive industry,” she said. Finance Minister Purbaya Yudhi Sadewa is targeting electric vehicle (EV) incentives, both for electric motorcycles and electric cars, to be implemented starting June 2026, leading to a decline in fuel oil (BBM) consumption. “We will calculate and prepare the budget for it. Certainly, I want it to be implemented starting early June,” Purbaya stated during a press conference of the Financial System Stability Committee (KSSK) in Jakarta on Thursday. Purbaya emphasised that the objective of the electric vehicle incentive policy is to change societal consumption patterns, from previously using BBM to using electricity. In this way, he continued, Indonesia’s imports of BBM and crude oil can be reduced. “This helps our economic resilience, so do not view it as a subsidy. The main goal is that, so we become more resilient economically from the energy side,” Purbaya said.