Indonesia’s electric vehicle (EV) market has grown rapidly over the past five years. From fewer than 150 battery electric vehicles (BEVs) sold in 2020, sales climbed to 17,051 units in 2023 before surging past 100,000 units in 2025.
When hybrid and plug-in hybrid vehicles are included, total EV sales nationwide reached roughly 175,000 units in 2025, up significantly from around 103,000 units in 2024.
The momentum has continued into 2026. In the first quarter alone, electric car sales reached 33,150 units, marking a 95.9% increase year-on-year. The figures suggest that Indonesia’s EV industry has entered a phase of accelerated growth.
Tax Incentives Behind EV Growth
The rapid growth of EV adoption is closely tied to a range of fiscal and non-fiscal incentives introduced by both the central and regional governments. The incentives include luxury goods sales tax relief and regional tax reductions.
Beyond tax incentives, the government has also introduced non-fiscal benefits, including exemptions from odd-even traffic restrictions. EVs are increasingly being positioned as a crucial element of Indonesia’s broader energy transition and carbon-emission reduction strategy.
Legal Basis for Regional EV Taxes
Regional taxes on EVs are primarily governed by the Law of the Republic of Indonesia Number 1 of 2022 concerning Financial Relations Between the Central and Regional Government (HKPD Law). Under the HKPD Law, the two main vehicle-related regional taxes are motor vehicle tax (pajak kendaraan bermotor/PKB) and motor vehicle title transfer fee (bea balik nama kendaraan bermotor/BBNKB).
The law gives regional governments flexibility in determining tax rates and incentive schemes for EVs. As a result, many provinces introduced exemptions or significant reductions for PKB and BBNKB on EVs.
National Policies Supporting EV Adoption
Indonesia’s EV push is also supported by Presidential Regulation Number 55 of 2019. The government offers a combination of fiscal and non-fiscal incentives for manufacturers, investors, and consumers.
These incentives include:
- Import-duty incentives for EVs and components;
- luxury goods sales tax incentives;
- exemptions or reductions for central and regional taxes;
- investment and manufacturing support;
- incentives for EV charging infrastructure development;
- electricity charging cost support; and
- support for research, innovation, and vocational training.
In addition, certain EVs are eligible for a 0% luxury goods sales tax rate, along with government-borne VAT incentives for vehicles meeting specific local content level requirements.
Regional EV Tax Policies
Several regions, including Jakarta, West Java, and Bali, have already implemented preferential regional tax policies for EVs. Most incentives take the form of reduced or fully exempt PKB and BBNKB.
As EV ownership continues to rise, discussions around adjusting these incentives have started to emerge. Regional governments are beginning to evaluate whether they can maintain full tax exemptions in the long run.
One of the main considerations is regional revenue since PKB remains a significant source of locally generated income.
Regulatory Changes and Future Direction
Minister of Home Affairs Regulation Number 11 of 2026 also reflects the shift in policy direction by updating the basis for calculating PKB, including those applicable to EVs.
Moving forward, EVs are still expected to receive preferential tax treatment, although likely no longer in the form of complete exemptions. Instead, regional taxes for EVs are expected to remain lower than those imposed on conventional vehicles.
Compared to other countries, Indonesia’s approach is often viewed as relatively moderate. Norway, for example, provides near-total tax exemptions for EVs, while countries such as China and the United States combine tax incentives with direct subsidies.
At the same time, several countries have begun scaling back EV incentives as adoption rates increase.
Indonesia’s regional EV tax policy is now entering a transitional phase. The policy is shifting away from full-scale incentives toward a more balanced framework.
Also read:
Article 26 Withholding Tax on Foreign Taxpayers
Navigating Tax Payments in the New Coretax System
Updates to the 0.5% MSME Final Income Tax and Its Business Impact
