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Vincent Tan

Indonesia’s next electric-vehicle push will test whether President Prabowo Subianto can turn rising demand, nickel wealth and consumer subsidies into an integrated domestic industry that captures more value at home, or merely make imported and locally assembled EVs cheaper to buy.
Analysts warn that without stricter local-content rules and stronger links between nickel processing, battery production and vehicle assembly, the incentives risk reinforcing Indonesia’s role as a large EV market rather than moving it up the supply chain.
Prabowo gave the agenda a public stage on August 13, when he marked the production of the 20,000th electric motorcycle at ALVA’s factory in Cikarang, West Java, and called on the manufacturer’s parent company, Indika Energy, to raise output to 200,000 units and eventually 2 million.
The event launched what Prabowo and the government described as a “national electric-motorcycle ecosystem”, with a government release saying the initiative would include lower instalment rates and zero down payments.
Prabowo also said Indonesia aimed to begin mass production of home-grown electric cars no later than 2028.
The bigger test will come with a separate EV stimulus package, which officials have said will be announced shortly and is expected to set the rules for which vehicles, battery types and local producers receive support.

In his 2027 budget address on Friday, Prabowo linked those consumer incentives to industrial policy, promising support for domestic electric-motorcycle production and outlining plans for a wider supply chain covering batteries, components, software and after-sales services.
“Electric motorcycle subsidies and probably later electric cars will create markets for the national industry,” Prabowo said.
The key question is how far the eligibility rules will support local factories, component suppliers, battery production, technology transfer and jobs, rather than only reducing the cost of vehicles already on the market.
Earlier this month, officials said the stimulus would cover about 500,000 electric motorbikes and focus on products creating high value in Indonesia, but domestic-content (TKDN) requirements were still being finalised.
Purchasing incentives
The incentives being considered include a full exemption from the luxury goods sales tax and a government-borne value added tax incentive of 40 per cent for eligible models.
The relief would apply strictly to battery EVs, excluding hybrids and plug-in hybrid types. Battery composition was also confirmed as a criterion, with officials weighing whether to favour nickel-based batteries over other chemistries.
The Association of Indonesia Automotive Industries (Gaikindo) recorded sales of 69,739 battery EV units in the first half of 2026, an 80.8 per cent year-on-year increase for the category.
A July 15 report by Detikoto, an Indonesian car news portal, based on Gaikindo sales data, showed the top five brands dominating the national EV market were BYD at 30.73 per cent, followed by Jaecoo at 24.36 per cent, then Geely, Wuling and GAC Aion.
These figures indicate a rapidly expanding market where consumer incentives could play a decisive role.
In May, the Indonesian Business Council said electric motorcycle sales exceeded 100,000 units in 2024 for the first time but fell to 55,059 the next year after the previous subsidy programme – at 7 million rupiah (US$393) per unit – ended.
“This shows that public interest is growing, but affordability remains a key factor in consumer decisions,” the council said.

Missing segments
For analysts, the bigger question is whether fresh incentives can draw more production into Indonesia, rather than simply accelerate sales in a market still led by foreign brands.
Bhima Yudhistira Adhinegara, executive director of the Centre of Economic and Law Studies, said Indonesia had developed nickel processing at one end of the chain and vehicle assembly at the other without building enough of the stages between them.
“There is a hollow in the middle of the whole nickel supply chain,” Bhima said.
The entry of Chinese carmakers expanded the Indonesian market but had not yet been sufficiently connected to other parts of the country’s industrial ecosystem, he added. “We are just the market. We are not the producers that gain more value-added from this EV penetration.”
Bhima said much of the new vehicle investment concentrated in assembly, while EV and battery investment was capital-intensive and had a lower employment multiplier than Indonesia’s established automotive industry and its network of component makers and service businesses.
Indonesia does have vehicle and battery manufacturing projects in the works, including Hyundai and Wuling electric-car plants in Cikarang, HLI Green Power’s battery-cell facility in Karawang and planned ventures involving Indonesia Battery Corporation, CATL, Antam and a Chinese group led by Zhejiang Huayou Cobalt.
But analysts said the existence of large projects did not show whether Indonesia was creating enough local suppliers, skilled jobs or technology transfer across the middle of the supply chain.
There is also a battery-chemistry question.
Bhima said many Chinese EVs entering Indonesia used lithium iron phosphate batteries and other chemistries, rather than nickel-based ones, meaning the technology did not match Indonesia’s nickel-based strategy.
Energy and Mineral Resources Minister Bahlil Lahadalia said earlier this month the government was considering differentiated incentives for nickel-based compositions, such as nickel-manganese-cobalt batteries.

Siwage Dharma Negara, a senior fellow and co-coordinator of the Indonesia Studies Programme at the ISEAS – Yusof Ishak Institute, said the proposed stimulus should be understood in two stages.
“The short-term objective is basically to reduce fuel-subsidy consumption. To promote the industry, it is going to take some time,” Siwage said.
Large investment figures, he said, did not by themselves show how many jobs or domestic suppliers would be created because mineral-processing and battery projects were capital-intensive and did not need such a large workforce.
That puts more weight on TKDN regulations, which are meant to push carmakers towards local sourcing.
Currently, locally produced electric cars must reach a minimum of 40 per cent TKDN through 2026, 60 per cent from 2027 to 2029 and 80 per cent from 2030 onwards, according to a Gaikindo summary of the regulations.
Siwage said enforcement could end up being “more flexible” if companies failed to meet commitments and the government worried about losing investment, tax revenue or employment. “The goalposts keep moving. They try to make it more flexible, and of course that makes it less credible.”
Indonesia’s approach contrasts with Thailand’s EV3.5 plan, which uses escalating production obligations requiring manufacturers to build two domestic units for every imported EV in 2026 and three in 2027.
“Thailand has greater bargaining power because it offers an established supplier network, supporting infrastructure and a mature automotive cluster. Thailand has also become a production hub for hybrid vehicles,” Siwage said.
Bhima also pointed to Vietnam, which offered workforce capability, greater policy certainty and simpler bureaucracy.
“Without a more integrated industrial policy,” he said, “Indonesia risks remaining a large consumer market, or a supplier of raw or processed materials, rather than developing the middle of the EV supply chain.”


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Analysts say stricter local-content rules and a stronger production framework will be needed to boost Indonesia up the EV supply chain


Analysts say stricter local-content rules and a stronger production framework will be needed to boost Indonesia up the EV supply chain.


Can Indonesia build on rising EV demand to become a production powerhouse?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Analysts say stricter local-content rules and a stronger production framework will be needed to boost Indonesia up the EV supply chain

Analysts say stricter local-content rules and a stronger production framework will be needed to boost Indonesia up the EV supply chain