Indonesia gives tax incentives to EV makers including China’s BYD, GAC Aion

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The carmakers, which are building factories in Indonesia, will enjoy an exemption on import taxes and a break on luxury taxes

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Workers assemble an EV inside BYD’s first EV factory in Southeast Asia, in Rayong, Thailand, on July 4, 2024. Photo: Reuters

Yujie Xue

Published: 8:30pm, 16 Dec 2024

Indonesia will offer tax incentives to manufacturers including China’s BYD and GAC Aion, as well as French company Citroen, in an effort to boost electric vehicle (EV) production and sales in the Southeast Asian country.

The three carmakers, all of which have committed to building factories in Indonesia, will enjoy an exemption on import taxes and a 15 per cent rate on the local luxury sales tax, known as PPnBM, Agus Gumiwang Kartasasmita, Indonesia’s Minister of Industry, said at a press conference on Monday.

The move, which will take effect at the start of next year, showcases Indonesia’s competitive regulatory environment to global investors and carmakers, Agus said, adding that it is in line with the government’s effort to make Indonesia a production hub for four-wheeled battery EVs in the Asean region.

Southeast Asia’s largest economy has set ambitious plans to build out a domestic EV industry, taking advantage of its rich reserves of nickel, a key ingredient for EV batteries. The government has been offering incentives such as tax breaks to lure EV-related investment from around the world. This includes the country’s first EV battery plant, a US$1.1 billion factory opened by Korean tech giants Hyundai and LG earlier this year.

Employees work on a production line at a GAC Aion factory in Guangzhou, Guangdong province, on February 28, 2024. Photo: VCG via Getty Images

EV and battery manufacturers from China, the world’s largest EV market, have also been actively setting up operations in Indonesia, along with other Southeast Asian countries, as a part of their overseas expansion plans while being hit with tariff hikes from the US and European Union.

Shenzhen-headquartered BYD, the world’s largest manufacturer of battery and plug-in hybrid EVs, entered the Indonesian market with three models – the Seal, Atto 3 and Dolphin – in January. Before that, it had secured a deal in 2023 to become the main EV supplier for local taxi company Blue Bird.