Purbaya Announces 40%-100% VAT Discount for Electric Vehicles, Here's a Sneak Peek at the Scheme

The government has confirmed it will provide incentives in the form of subsidies for purchasing new electric vehicles. The quota allocated for electric vehicle incentives amounts to 100,000 units.

One of the main instruments in this push is the Value Added Tax (VAT) borne by the government. Purbaya will develop the most effective scheme to implement, one of which concerns the battery content based on nickel or non-nickel. Previously, Purbaya considered that nickel content in electric vehicle batteries would receive larger incentives than non-nickel ones. This is because the government wants to boost downstream processing of that critical mineral commodity.

“There will be variations for vehicles; some will get 100% for the tax, others 40%, depending on the battery,” said Purbaya during a press conference in Jakarta on Thursday (7/5/2026).

Meanwhile, for new electric motorcycles, the government will also provide incentives of Rp5 million per unit. The allocation for electric motorcycle subsidies this year is 100,000 units.

“So, for electric motorcycles and cars, I’ve discussed it with the Minister of Industry and the Coordinating Minister for the Economy; the budget is still being calculated. For motorcycles, approximately Rp5 million per motor, 5 million rupiah per motor for 100,000 motors,” he added.

Purbaya emphasised that the policy will take effect in June 2026. He hopes this policy will encourage the public to switch to electric vehicles, thereby reducing fuel oil imports.

“I want it to be implemented at the beginning of June so that in the second quarter there is a push; importantly, there is a switch from BBM usage to electricity so that our fuel oil imports and oil can decrease; that helps our economic resilience. So don’t just look at the subsidy; that’s the main goal for our economy to withstand from the energy side,” Purbaya stressed.