New EV Rules: CBU Imports Opened, Local

Content Obligations Delayed

President Joko Widodo has issued Presidential Regulation No. 79/2023,
amending Presidential Regulation No. 55/2019 concerning the acceleration of
the battery electric vehicle (BEV) program. One of the crucial points
involves the amendment to Article 8, which regulates the minimum local
content requirement (TKDN) within specific time frames. Under the latest
regulations, the government has set a minimum TKDN for EVs at 40 percent
until 2026. In the previous rules, the 40 percent TKDN was to be achieved by
2024, followed by a requirement of 60 percent TKDN before 2030 and
mandating 80 percent local content after that.

Another significant aspect concerns incentives. Article 18 of Presidential

Regulation No. 79/2023 mentions that BEV industry companies procuring
completely built-up (CBU) imported vehicles can receive incentives. As
stated in Article 17i, incentives encompass fiscal and non-fiscal benefits for
companies providing public electric vehicle charging stations (SPKLU),
electric vehicle battery swap stations (SPBKLU), and entities or residences
utilizing private electrical installations.
Investment Minister Bahlil Lahadalia stated that the technical ministries have
completed harmonizing the new EV regulations. Bahlil emphasized that
import quotas for EVs will be determined and only granted to automotive
manufacturers committed to investing in the country. For instance, he
mentioned that if a foreign brand intends to enter Indonesia, there must be a
commitment to the production capacity to be built. Only after this
commitment will the government allocate import quotas. "If they build a new
factory at 20 percent, we will allocate a 20 percent quota," he said on Dec 11.

The government has deliberated extensively in updating regulations

regarding EVs. The considerations outlined in Presidential Regulation No.
79/2023 state that the accelerated plan for enhancing the BEV ecosystem
necessitates an expanded scope of vehicle types, adjustments in the
application of TKDN, and reinforced support from both the central and
regional governments. Apart from fulfilling the TKDN, the technical aspect
that became pivotal in revising the regulations was incentivizing investment
in EV production. The government perceives that providing tax breaks and
fiscal incentives alone might not be enticing enough for global automotive
companies to establish factories in Indonesia unless they can sell their
products through CBU imports.

Several senior officials, including Maritime Affairs and Investment

Coordinating Minister Luhut Pandjaitan and Industry Minister Agus
Gumiwang Kartasasmita, have expressed that easing regulations is crucial to
expedite the formation of the EV ecosystem, which inevitably requires
involvement from giant global corporations. By exempting import taxes and
duties on CBU EVs, the government hopes for a multiplier effect, leading to
the construction of factories that will employ local labor while facilitating
technology transfer. The government refers to Thailand's policy of exempting
CBU import taxes for products from countries with Free Trade Agreements
(FTAs) and investment cooperation.

Hence, the government has amended Article 12 to grant import permits for
CBU BEVs to companies intending to build BEV production facilities, those
who have invested in domestic BEV manufacturing facilities, and companies
seeking to increase BEV capacity to introduce new products. These import
permits will be limited in quantity, considering the realization of
development, investment, and increased BEV production. The technical
regulations on procurement will be governed by the Industry Minister, Trade
Minister, Investment Minister, and Finance Minister. Article 18 also
stipulates that companies meeting specific conditions for importing CBU
BEVs can receive incentives.
Regarding incentives, the government introduced a new clause, Article 19A,
stating that the government will bear the import duties for CBU BEV
imports. Besides the government-borne import duties, other incentives
include exemptions from luxury goods sales tax (PPnBM) and local taxes for
CBU BEV imports. These concessions also extend to importing capital goods
and production equipment for BEV manufacturing plants, making this project
even more appealing to investors. This regulation is a progressive approach
to attracting investment. However, there is a risk of flooding the market with
imported products and violations of investment commitments if the
government fails to oversee the policy's implementation.

**Presidential Regulation No. 79/2023 is attached below this text

https://cdn1.katadata.co.id/media/dinsights/files/2023/12/13/2023_12_13-
06_40_26_58961458cebb170d477b8fc612fc7fa4.pdf

https://dinsights.katadata.co.id/read/2023/12/13/new-ev-rules-cbu-imports-opened-local-content-
obligations-delayed