The government of Indonesia has just cut the electric vehicles’ value-added tax (VAT) from 11% to just 1% starting in April, Reuters reports. However, the EVs must have at least 40% local content in order to qualify for the tax credit.
In effect, auto executives said EV sales in the country increased last month following the announcement.
With these recent government initiatives, EV uptake continues to increase in Southeast Asia’s largest economy.
How the tax cut aids automakers?
With at least 40% local content used in production, South Korea’s Hyundai IONIQ 5 SUV is qualified for the tax cut. Thus, the model recorded a three-fold sales growth to more than 600 units in April from the prior month, Hyundai Motor ASEAN’s executive disclosed (via Reuters).
“At the moment EVs are very expensive because of the battery. So I think in the beginning we need a kind of subsidy from the government and it will increase the demand for EVs.”
Sanghoon Yoon, Hyundai Motor ASEAN’s executive
It is worth noting that Hyundai set a target of selling 10,000 IONIQ 5 units in 2023. Yoon claims that the newly implemented tax cuts and the improvement of the semiconductor chip situation will aid the automaker in achieving the target.
Interestingly, the 10,000 sales target represents a significant increase from its current sales of 3,000 units since it debuted in the country in 2021.
On the other hand, Wuling Air EV sales grew by over 80% from the prior month to approximately 740 units, SGMW Motor Indonesia’s marketing director Dian Asmahani stated.
Notably, SGMW Motor Indonesia produced the Wuling Air EV in the country under a joint venture with the Chinese firm Wuling Motors Holdings.
Reuters further mentioned that Hyundai IONIQ 5 SUV and Wuling Air EV are the top-selling EVs in Indonesia.
That considered, Yoon asserted that the South Korean automaker intends to expand its line-up of battery-powered vehicles in Indonesia to take advantage of the expanding market.
See Also:
- Volkswagen plans to produce EV batteries in Indonesia, forms partnerships with major companies
- Indonesia’s new EV subsidy program covers 250,000 e-bikes and 39,500 electric cars
- Mitsubishi plans to start Minicab-MiEV Kei Van production in Indonesia by 2024
- Tesla to finalize planning for a plant in Indonesia
- Tesla, BYD to invest in EV production plants in Indonesia
In February, Fitch Ratings stated that sales of four-wheeled EVs, including hybrid versions, will surpass 50,000 units in Indonesia by 2023. It reflects an almost two-fold rise from 20,681 units the previous year. It would not be surprising if the Indonesian automaker actually reached that mark, considering that government incentives may offer a possible boost to the prediction.
