Accelerating Indonesia’s Electric Vehicle Industry: Insights into TKDN and Presidential Regulation No. 79/2023

In a strategic move to transform its transportation landscape, the Indonesian government has enacted Presidential Regulation (Perpres) No. 79 of 2023, amending the earlier Perpres No. 55 of 2019. This regulation introduces a suite of incentives and updated provisions designed to expedite the adoption and production of Battery Electric Vehicles (BEVs) within the country.

Key Takeaways

1. Policy Update: Presidential Regulation No. 79/2023 amends previous policies to accelerate the adoption and production of Battery Electric Vehicles (BEVs) in Indonesia.
2. Incentives for Importers: Qualified companies can import BEVs in completely built-up (CBU) conditions with exemptions on customs duties, luxury goods sales tax (PPnBM), and local taxes.
3. Support for Domestic Production: Local BEV manufacturers receive benefits, including reduced import duties on raw materials and tax exemptions, contingent on meeting Domestic Component Level (TKDN) requirements.
4. Progressive TKDN Targets: The regulation sets escalating TKDN percentages for two-wheeled and four-wheeled BEVs, reaching up to 80% by 2030, to promote local industry growth.
5. Strategic Implications: These measures aim to attract investment, enhance BEV adoption, and strengthen Indonesia’s position in the global electric vehicle market.

Key Provisions of Presidential Regulation No. 79/2023

1. Criteria for Importing BEVs

Under Article 12, the regulation specifies criteria for battery-based electric vehicle industry companies eligible to import BEVs in completely built-up (CBU) condition:

• Domestic Manufacturing Plans: Companies must have concrete plans to establish BEV manufacturing facilities in Indonesia.
• Investment in Local Production: Entities that have invested in domestic BEV manufacturing as part of introducing new products are eligible.
• Production Capacity Expansion: Companies aiming to enhance their BEV production capacity to support new product lines qualify.

These companies are permitted to import BEVs in limited quantities until the end of 2025, subject to approval from the minister overseeing investment. This decision considers the progress of infrastructure development, investment realization, and expansion of BEV production capacities.

2. Incentives for Importing BEVs

A notable feature of the regulation is the array of incentives offered to companies importing BEVs in CBU condition, as detailed in Article 19A:

• Customs Duty Exemptions: Import duties on BEVs are either exempted or borne by the government, reducing initial costs.
• Luxury Goods Sales Tax (PPnBM) Relief: BEVs in CBU condition benefit from exemptions or government-covered PPnBM, making electric vehicles more price-competitive.
• Local Tax Reductions: Regional taxes on BEVs may be reduced or exempted, further lowering the financial barriers for importers.

3. Incentives for Domestic BEV Production

To stimulate local manufacturing, the regulation provides incentives for companies producing BEVs domestically:

• Import Duty Relief on Production Inputs: Reduced duties on importing raw materials, auxiliary materials, machinery, and equipment essential for BEV production.
• PPnBM Reductions: Tax exemptions or reductions for BEVs manufactured in Indonesia enhance their market competitiveness.
• Local Tax Benefits for CKD BEVs: Completely knock-down (CKD) BEVs are eligible for local tax exemptions or reductions, encouraging assembly operations within the country.

These incentives are contingent upon companies committing to produce a specified number of BEVs within set timeframes, adhering to the Domestic Component Level (TKDN) requirements, and providing guarantees equivalent to the value of incentives received.

4. Progressive TKDN Requirements

The regulation sets forth escalating TKDN targets to bolster local industry participation:

• Two-Wheeled BEVs:
  • 2019–2026: Minimum TKDN of 40%.
  • 2027–2029: Minimum TKDN of 60%.
  • 2030 and beyond: Minimum TKDN of 80%.
• Four-Wheeled BEVs:
  • 2019–2021: Minimum TKDN of 35%.
  • 2022–2026: Minimum TKDN of 40%.
  • 2027–2029: Minimum TKDN of 60%.
  • 2030 and beyond: Minimum TKDN of 80%.

These progressive requirements are designed to encourage the utilization of domestic components, foster the growth of local industries, and reduce dependence on imports.

How Permitindo Can Assist

Navigating the complexities of regulatory compliance, especially concerning TKDN requirements and BEV production incentives, can be challenging. Permitindo offers specialized services to guide companies through this intricate landscape:

• TKDN Certification Assistance: Ensuring your products meet the required domestic component levels to qualify for government incentives.
• Business Licensing Support: Facilitating the acquisition of necessary permits and licenses for establishing BEV manufacturing facilities in Indonesia.
• Regulatory Compliance Advisory: Providing insights and strategies to align your operations with the latest governmental regulations and benefit from available incentives.

By partnering with Permitindo, your business can efficiently achieve TKDN compliance and capitalize on the incentives outlined in Presidential Regulation No. 79/2023, positioning you favorably in Indonesia’s burgeoning electric vehicle market.

Conclusion

Presidential Regulation No. 79/2023 signifies a pivotal advancement in Indonesia’s commitment to sustainable transportation. The regulation not only incentivizes the adoption of electric vehicles but also emphasizes the importance of domestic industry participation through stringent TKDN requirements.

For businesses aiming to navigate this evolving landscape, understanding and complying with these regulations is crucial. Collaborating with experienced professionals like Permitindo can ensure a seamless integration into Indonesia’s dynamic electric vehicle sector.