To Save Local Industry, Electric Vehicle Policies Need Evaluation

JAKARTA - A senior researcher from the Bandung Institute of Technology’s (ITB) Centre for Sustainable Transport Systems, Agus Purwadi, has called on the government to dynamically evaluate electric vehicle policies. The growth of battery electric vehicles (BEVs) in Indonesia has not been fully matched by strengthening the domestic industrial base, and it even risks pressuring existing ecosystems. According to Agus, the current incentive schemes and domestic content requirements (TKDN) make it relatively easy for new players to enter without encouraging deeper investments. “Meanwhile, existing producers that have localised and involved local industries are being eroded because policies lean towards stimulating such new investments,” Agus continued. He explained that this situation keeps most industrial activities focused on assembly, while key components still come from the country of origin. On the other hand, this could trigger market cannibalisation, particularly against long-standing internal combustion engine (ICE)-based players who do not receive similar incentives. “Thailand can serve as a valuable lesson learned. They have faced problems in their automotive sector, with many factories closing due to cannibalisation. New products do not expand the market but instead erode the existing one,” he said. According to him, this needs to be anticipated to prevent it from happening in Indonesia, especially when public purchasing power is under pressure. “Our market is not doing well right now. Purchasing power is declining, so if there are new products, especially with big incentives, it can erode the existing market,” Agus stated. He warned that without policy evaluation, existing industries could weaken, while new players may not immediately build a strong production base domestically. As a comparison, Agus mentioned that India and Vietnam have been relatively more successful in balancing electrification with strengthening local industries. Therefore, he stressed that electric vehicle policies cannot remain static in the long term. “This must be evaluated dynamically. Initially, incentives were given to encourage the early stage, around 5 percent early adopters. Now that it has passed (over 10 percent), it needs to be reviewed again,” Agus said. He emphasised that such evaluation is crucial so that electrification policies not only drive sales but also strengthen the competitiveness of the national automotive industry.