Indonesia: Battery production for 400k EVs in 2025; state and private enterprise collaboration

Luxury tax cut to boost domestic demand, exemptions extended to the end of 2021



  Regarding Indonesia's electrification strategy, the Indonesian government announced an electric vehicles (EV) production roadmap in July 2021. According to the roadmap, with plans to produce 400,000 EVs in 2025, 600,000 in 2030 and 1 million in 2035. State enterprises and private companies will collaborate to build EV batteries in Indonesia by using its abundant nickel ore natural resources to make the country a production hub for EVs. The government also plans to establish a supply chain consisting of joint ventures for mining, smelting, producing the precursor product, cathode and battery pack as well as battery recycling.

  The Indonesian government has started the relaxation of sales tax on luxury goods in March 2021 as a demand stimulus measure for the automotive industry which had been impacted by the Covid-19 pandemic. Initially, the 100% exemption of the luxury sales tax for vehicles with an engine displacement of 1500 cc or less was available until the end of May 2021, but was extended to the end of December 2021. Regarding vehicles with an engine displacement of 1501-2500 cc, the periods for 50% tax reduction for 4x2 vehicles and 25% tax reduction for 4x4 vehicles were extended to the end of December 2021.

  According to statistics of the Association of Indonesian Automotive Industries (GAIKINDO), production volume in 2020 declined by 46.4% year-over-year (y/y) to 690,000 units while sales volume fell to 532,000 units, down by 48.4% y/y. Exports of completely built-up (CBU) vehicles from Indonesia decreased by 30.1% y/y to 232,000 units. Indonesia’s production, sales and exports in 2020 significantly shrank due to the impact of the COVID-19 pandemic.

  Production for the period from January to July 2021 increased to 589,000 units, up by 49.4% y/y, while sales volume grew by 60.8% y/y to 460,000 units. Exports of CBU vehicles rose to 166,000 units, up by 38.2% y/y. The relaxation of the sales tax on luxury goods implemented by the government to support the automotive industry increased the demand for vehicles.

  Regarding activities related to vehicle production in Indonesia, Hyundai Motor is building a new plant with an annual production capacity of 150,000 units, which is scheduled to start manufacturing in December 2021. Toyota, Honda, Mitsubishi and Suzuki are planning to make investments in the country for the production of electrified vehicles, and other purposes. Daihatsu has started production of the Rocky subcompact SUV launched in April 2021 in Indonesia, while Honda began local manufacturing of the new City RS compact hatchback released in March 2021.

Daihatsu Rocky インドネシアの自動車生産・販売・輸出台数
Daihatsu Rocky (SUV released in April 2021)(Photo: Daihatsu) Indonesia's vehicle production, sales and exports
(Source: Created by MarkLines based on GAIKINDO's data)


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