Legal Framework for Developing the Electric Vehicle Industry in Indonesia: Regulations, Taxation, Investment, and Local Content (TKDN)

1. Introduction

The global energy transition to cleaner and more sustainable resources has established the electric vehicle (“EV”) industry as a key pillar of the world’s decarbonisation agenda. In its commitment to achieving the target of Net Zero Emissions (“NZE”) by 2060, Indonesia regards the development of the EV industry not only as an environmental solution and a strategic opportunity to transform the national economic landscape. The country’s potential as a large automotive market, coupled with its abundant natural resources, particularly nickel, forms a strong foundation for its ambition to become a major player in the global EV supply chain.

Recognizing this potential, the Government of Indonesia has proactively established a comprehensive and multisectoral policy architecture / (framework). Various regulations, ranging from laws to ministerial regulations, have been enacted to create a conducive ecosystem to foster the growth of the electric vehicle industry. This regulatory framework covers the entire industrial spectrum, including the upstream sectors of mineral mining, component manufacturing, and vehicle assembly as well as the downstream sector, including charging infrastructure and consumer adoption.

This analysis provides a comprehensive examination of the legal framework and government policies supporting the development of Indonesia’s electric vehicle industry. It systematically maps and analyzes the relevant regulatory instruments, with a primary focus on taxation, local content (“TKDN”), and electric vehicle charging infrastructure development. Stakeholders are expected to gain a clear and structured understanding of Indonesia’s regulatory landscape for the EV industry through this analysis.

 

2. Legal Basis and Government Policy

The legal framework for the EV industry in Indonesia is based on energy and environmental policies as well as specific regulations aimed at accelerating the electric vehicle program.

2.1 Energy and Environmental Policies

The basis for national energy policy is set forth in Law No. 30 of 2007 on Energy (“Law 30/2007”), which requires energy diversification and conservation. This law enables the government to encourage the utilization of new and renewable energy sources, one of which is transport electrification. Law No. 32 of 2009 on Environmental Protection and Management (“Law 32/2009”) reinforces this principle by providing the legal framework for controlling greenhouse gas emissions and air pollution in the transportation sector.

Government Regulation No. 79 of 2014 on the National Energy Policy (“KEN”) sets forth a more concrete policy direction explicitly targeting the share of New and Renewable Energy (“EBT”) in the national primary energy mix to reach at least 23% by 2025. Developing electric vehicles is one of the key programs to achieve this goal. To ensure a clean power supply for the EV ecosystem, the government issued Presidential Regulation No. 112 of 2022 on Accelerating Renewable Energy Development for Power Supply. This regulation promotes renewable energy power plants but also progressively restricts and plans the phase-out of coal-fired power plants (PLTU).

2.2 Policies Related to Electric Vehicles

The main regulation that serves as the “blueprint” for the national EV industry is Presidential Regulation No. 55 of 2019 on the Acceleration of the Battery Electric Vehicle Program for Road Transportation (“Presidential Regulation 55/2019”). This regulation provides a comprehensive framework for developing the EV industry from upstream to downstream. It covers research and development, manufacturing, charging infrastructure development, technical standards, and incentive schemes. Presidential Regulation No. 79 of 2023 later refined the regulation by amending Presidential Regulation 55/2019 to provide greater flexibility in local content compliance and strengthen various forms of government support to accelerate EV adoption.

To increase market penetration, the government has also opened the pathway for converting internal combustion engine vehicles into Battery-Based Electric Motor Vehicles (“KBLBB”). Minister of Transportation Regulation No. PM 39 of 2023 on the Conversion of Motorcycles with Internal Combustion Engines into Battery-Based Electric Motorcycles (“Permenhub PM 39/2023”) stipulates the detailed technical and safety requirements for motorcycle conversions. Meanwhile, Minister of Transportation Regulation No. PM 15 of 2022 governs the conversion of non-motorcycle vehicles. Together, these two regulations create opportunities for local workshops to participate in the EV ecosystem and provide the public with a more affordable option for the public to transition to electric vehicles.

 

3. Tax Policy and Incentives for the Electric Vehicle Industry

In addition to the Luxury Goods Sales Tax (“PPnBM”), the government actively provides incentives in the form of a Government-Borne Value Added Tax (“PPN DTP”). According to Minister of Finance Regulation No. 8 of 2024 on Value Added Tax on the Delivery of Certain Battery-Based Electric Motor Vehicles and Certain Battery-Based Electric Buses Borne by the Government for Fiscal Year 2024 (“PMK 8/2024”), VAT on the purchase of qualifying four-wheeled, bus, and two-wheeled Battery-Based Electric Motor Vehicles that meet TKDN requirements shall be borne by the government.

This policy continues into the following fiscal year through Minister of Finance Regulation No. 12 of 2025 on Value Added Tax on the Delivery of Certain Battery-Based Electric Motor Vehicles and Certain Battery-Based Electric Buses, as well as the Luxury Goods Sales Tax on the Delivery of Low-Carbon Emission Four-Wheeled Electric Vehicles Borne by the Government for Fiscal Year 2025 (“PMK 12/2025”). This regulation effectively reduces the VAT payable by consumers, thereby lowering retail vehicle prices. It also provides additional incentives by covering a portion of the PPnBM for certain hybrid vehicles.

The following table summarizes the main tax incentives applicable to various types of electric vehicles:

 

4. Local Content (TKDN) and the Electric Vehicle Industry

4.1 Local Content (TKDN) Policy

The government’s strategy to build self-reliance in the EV industry hinges on the obligation to meet the Local Content (TKDN). Minister of Industry Regulation No. 6 of 2022 establishes a roadmap for EV development and a mechanism for calculating TKDN / the local content value. Meanwhile, Presidential Regulation No. 79 of 2023 stipulates the minimum achievement targets that manufacturers must fulfil.

The minimum TKDN targets increase gradually as follows:

Compliance with these targets is mandatory and serves as a prerequisite for accessing fiscal incentives, including Government-Borne VAT (PPN DTP). During the transition period, manufacturers are granted flexibility through the Completely Knocked Down (CKD) and Incompletely Knocked Down (IKD) import schemes as regulated by Minister of Industry Regulation No. 28 of 2020 jo. No. 7 of 2022.

Composition of TKDN Calculation

Under Minister of Industry Regulation No. 6 of 2022, in conjunction with No. 28 of 2023, the TKDN weight for EVs is determined based on the following aspects, totaling 100%:

These weights serve as value slots filled in proportion to the local content. For example, if 50% of batteries (with weight of 40%) are produced domestically, their contribution to TKDN is 20% (40% × 50%).

4.2 The Role of TKDN in Enhancing Investment and Local Production

The progressive TKDN policy has driven:

1. Major investments in the battery sector: This policy, which accounts for 40–50% of the supply chain, has attracted investments worth hundreds of trillions of rupiah throughout the supply chain, from nickel processing and precursor/cathode production to cell and battery pack manufacturing in Indonesia.
2. Technology transfer for drivetrains: Although electric motors account for only 5% of the total weight, TKDN requirements have encouraged industries to develop local capabilities in electric motor and drivetrain production, supported by research and development activities.
3. Expansion of assembly plants: The 20–30% assembly weight requirement provides strong incentives for manufacturers to establish EV production and assembly lines in Indonesia, thereby increasing domestic production capacity.
4. Creation of high-technology jobs: The assembly and R&D aspects incorporate local labor contributions into TKDN, creating new job opportunities for engineers, technicians, and researchers specializing in batteries, motors, and vehicles.
5. Economic multiplier effects: Involving small and medium enterprises (SMEs) in supplying supporting components, such as electronics, wiring, and materials, broadens the domestic industrial base integrated into the EV supply chain.

5. Electric Vehicle Charging Infrastructure

5.1 Development of Public Electric Vehicle Charging Stations (SPKLU)

Adequate charging infrastructure is crucial to building consumer confidence in electric vehicles. Insufficient infrastructure would reduce consumer interest and impede the transition toward EVs. Therefore, Regulation of the Minister of Energy and Mineral Resources No. 1 of 2023 on the Provision of Electric Charging Infrastructure for Battery-Based Electric Motor Vehicles (“Permen ESDM 1/2023”) is the key regulation governing the construction and operation of Public Electric Vehicle Charging Stations (“SPKLU”) and Public Electric Vehicle Battery Exchange Stations (“SPBKLU”) in Indonesia. The regulation aims to ensure the availability of infrastructure to support the use of EVs and achieve Indonesia’s sustainable energy transition goals.

Objectives and Focus of the Regulation

1. Accelerating the Transition to EVs: The regulation encourages the shift toward Battery-Based Electric Motor Vehicles (“KBLBB”) to reduce carbon emissions and support the utilization of renewable energy.
2. Provision of Charging Infrastructure: Integrated and reliable charging infrastructure is essential for the sustainable use of EVs in Indonesia.

5.2 Challenges and Solutions in Infrastructure Development

Despite the existing regulatory framework, developing SPKLUs presents significant challenges, including substantial investment requirements, strategic site selection, and varying grid readiness across regions. To address these challenges, the government is promoting diverse business models and simplifying licensing for private entities interested in investing in SPKLU and SPBKLU provision.

Regulation of the Minister of Energy and Mineral Resources No. 1 of 2023 also establishes cooperation schemes through which private entities may work with PT PLN (Persero) to provide and operate SPKLUs. These partnership schemes enable private partners to contribute according to their resources and capabilities, whether by providing charging facilities or managing operations.

a. SPKLU Partnership Schemes

Although the regulation generally recognizes ten business models, PLN only applies four main partnership schemes derived from those models, as published on the official PLN service website. The four national business models are:

(1) POSO (Provide, Own, Self-Operated)

PLN shall provide and operate the charging facilities, distribute and sell electricity, as well as provide the information and communication technology (ICT) platform. The partner provides the land for the SPKLU.

(2) PPOO (Provide, Privately Owned and Operated)

PLN shall provide and sell electricity, as well as the ICT platform. The business partner provides and operates the charging equipment and supplies the land.

(3) Dual Partner PPO Combination

PLN shall supply and sell electricity, as well as manage the ICT platform. Partner 1 shall provide and operate the charging equipment, and Partner 2 shall supply the land.

(4) RLPO (Retail, Lease, Privately Operated)

PLN shall provide and sell electricity to the partner, as well as provide the ICT platform. In turn, the partner shall provide and operate the SPKLU, hold the IUPTLU (electricity supply business license for the public interest) for sales, as well as perform geotagging via PLN’s platform.

b. SPKLU Partnership Requirements

To participate in the PLN SPKLU Partnership Program, prospective partners must meet the following requirements to:

(1) Own a plot of land measuring at least 6 by 7 square meters;

(2) Have sufficient capital to invest in the PLN SPKLU partnership business;

(3) Not be listed on the PLN’s blacklist;

(4) Possess resources (e.g., assets, technology, capital, human resources, and others) that can support the cooperation;

(5) Not be undergoing debt restructuring, bankruptcy, or experiencing major financial losses, as evidenced by financial statements or other relevant documents;

(6) Not be engaged in disputes or litigation with PLN;

(7) Obtain land or location permits for SPKLU development and provide documentary evidence;

(8) Be located in an area with potential EV charging demand;

(9) Be in a strategic and accessible location for EV users; and

(10) Not be required to possess an electricity supply business license (IUPTL) for sales or operations in the PLN SPKLU Partnership.

c. SPKLU Partnership Registration Process

Prospective partners may register through the official PLN service website by following these steps:

(1) Product socialization

(2) Submit an application 

(3) Document verification and financial and operational analysis

(4) Offer and negotiation

(5) Signing of the Cooperation Agreement

(6) Partner pays SPKLU Installation Fee 

(7) SPKLU construction

(8) SPKLU testing

(9) Register the SPKLU with the Ministry of Energy and Mineral Resources (ESDM)

(10) Commercialization and operation of the SPKLU

d. SPKLU Charging Technology

PLN offers EV charging technologies with various power capacities, consistent with Permen ESDM No. 1/2023. These are as follows:

(1) Slow Charging: Output power up to 7 kW.

(2) Medium Charging: Output power above 7 kW and up to 22 kW.

(3) Fast Charging: Output power above 22 kW and up to 50 kW.

(4) Ultra-Fast Charging: Output power above 50 kW.

e. Technical Requirements

(1) Certification and Indonesian National Standards (SNI):

All SPKLU equipment must comply with the applicable SNI standards for EV charging, including connectors and charging systems.

(2) Control and Safety Systems:

• Each connector channel must have separate system for controlling current, voltage, and communication to ensure safe and efficient charging. 
• Equipment must include protection systems and indicator lights to ensure the safety of users and equipment.

(3) Infrastructure Provision:

• SPKLUs must be installed in easily accessible, strategic locations that comply with traffic safety and order requirements. 
• Recommended locations include public fuel stations, highway rest areas, office complexes, and shopping malls.

f. Evaluation and Supervision

(1) Supervision and Guidance:

The Minister of Energy and Mineral Resources, through the Directorate General of Electricity, shall supervise and direct all SPKLU and SPBKLU operators to ensure they comply with technical and safety standards.

(2) Reporting and Evaluation:

Every SPKLU business entity must submit activity reports on its electricity charging operations to KBLBB for evaluation of regulatory compliance.

 

6. Indonesia’s Natural Resources for the Electric Vehicle Industry

6.1 Nickel Resource Potential

Indonesia’s greatest comparative advantage in the global EV industry lies in its abundant nickel reserves, an essential raw material for lithium-ion battery production. To maximize the value of this resource, the government enforces an aggressive mineral downstreaming policy.

6.2 Mineral Downstreaming for EV Batteries

Law No. 3 of 2020, on amendment to Law No. 4 of 2009 on Mineral and Coal Mining (“Law 3/2020”), and its subsequent amendment, Law No. 2 of 2025 are the foundation of Indonesia’s downstream policy. These regulations strictly prohibit the export of raw nickel ore and require mining companies to establish domestic processing and refining (smelter) facilities. The goal of this policy is to attract significant investment in midstream and downstream industries, including precursor and cathode production, as well as battery cell and pack assembly. This will position Indonesia as a central hub in the global EV battery supply chain.

 

7. Economic and Social Impacts of EV Policies

7.1 Economic Impact

The established policy architecture is expected to have significant multiplier effects on the economy. According to Presidential Regulation No. 18 of 2020 on the National Medium-Term Development Plan 2020–2024 (“Presidential Regulation 18/2020”), the development of the EV industry is one of the Strategic Priority Projects. Increased investment in both vehicle assembly and component manufacturing sectors directly generates new employment opportunities. The growth of supporting industries also creates new markets for small and medium enterprises. On a macro scale, the program’s success will reduce trade deficits from fuel imports and strengthen the national industrial structure.

7.2 Social Impact

From a social standpoint, the widespread adoption of EVs will significantly improve air quality in major cities, thereby enhancing public health. Lower operational costs also ease the long-term economic burden on households.

 

8. Prospects and Challenges

8.1 Prospects of the Electric Vehicle Industry in Indonesia

Indonesia’s EV industry outlook is highly promising, thanks to strong regulatory support and vast market potential. The country is poised to become the dominant market in Southeast Asia and a strategic production and export base for global automotive players.

8.2 Challenges Ahead

However, several fundamental challenges remain. Despite incentives, EV prices are still relatively expensive for a large portion of the population. An uneven charging infrastructure remains a key consumer concern, known as “range anxiety”. Moreover, meeting increasingly stringent TKDN targets will be the real test of Indonesia’s industrial self-reliance, as it will depend on the ability of local component industries to produce the necessary parts.

 

9. Conclusion

The Indonesian government has established a solid and comprehensive legal foundation for navigating the electrification era. Through policies that include fiscal incentives, mandatory TKDN, infrastructure development, and resource downstreaming, an integrated EV industry ecosystem is beginning to emerge.

The TKDN policy is a key instrument that ensures value creation occurs domestically. With weights of 40–50% for batteries, 5% each for electric motors and vehicle bodies, and additional contributions from assembly, R&D, and supporting components, the policy drives significant investment along strategic supply chains while creating high-technology jobs.

Close collaboration among the government, state-owned companies (BUMN), the private sector, SMEs, and research institutions will be critical to realizing this grand vision. Strategic steps forward must focus on the following:

1. Consistent policy implementation to achieve progressive TKDN targets of 40–80% between 2022 and 2030;
2. The accelerated and equitable development of charging infrastructure nationwide;
3. Optimizing fiscal and tax incentives, including Government-Borne VAT (PPN DTP), PPnBM exemptions, import duty relief, and local incentives, to align consumer adoption with domestic industrial strengthening; and
4. Strengthening local component manufacturing capacities for components, particularly in batteries and electric motors so Indonesia can fully capitalize on the electric vehicle revolution.

Thus, Indonesia’s EV industry development is not only an energy transition effort but also a national industrialization strategy aimed at establishing Indonesia as a regional electric vehicle production and innovation hub.

 

 

References

Law No. 30 of 2007 on Energy. State Gazette No. 96 of 2007.

Law No. 30 of 2009 on Electricity. State Gazette No. 133 of 2009.

Law No. 32 of 2009 on Environmental Protection and Management. State Gazette No. 140 of 2009.

Law No. 3 of 2020 on the Amendment to Law No. 4 of 2009 on Mineral and Coal Mining. State Gazette No. 147 of 2020.

Law No. 2 of 2025 on the Fourth Amendment to Law No. 4 of 2009 on Mineral and Coal Mining. State Gazette No. 29 of 2025.

Government Regulation No. 79 of 2014 on the National Energy Policy. State Gazette No. 300 of 2014.

Government Regulation No. 73 of 2019 on Luxury Taxable Goods in the Form of Motor Vehicles Subject to Luxury Goods Sales Tax. State Gazette No. 189 of 2019.

Government Regulation No. 74 of 2021 on the Amendment to Government Regulation No. 73 of 2019. State Gazette No. 150 of 2021.

Presidential Regulation No. 55 of 2019 on the Acceleration of the Battery Electric Vehicle Program for Road Transportation. State Gazette No. 146 of 2019.

Presidential Regulation No. 18 of 2020 on the National Medium-Term Development Plan 2020–2024. State Gazette No. 10 of 2020.

Presidential Regulation No. 112 of 2022 on the Acceleration of Renewable Energy Development for Power Supply. State Gazette No. 181 of 2022.

Presidential Regulation No. 79 of 2023 on the Amendment to Presidential Regulation No. 55 of 2019. State Gazette No. 154 of 2023.

Regulation of the Minister of Energy and Mineral Resources No. 1 of 2023 on the Provision of Electric Charging Infrastructure for Battery-Based Electric Motor Vehicles. State Gazette No. 64 of 2023.

Minister of Finance Regulation No. 141/PMK.010/2021 on the Determination of Types of Motor Vehicles Subject to Luxury Goods Sales Tax and Procedures for the Imposition, Granting, and Administration of Exemption and Refund of Luxury Goods Sales Tax. State Gazette No. 1150 of 2021.

Minister of Finance Regulation No. 42/PMK.010/2022 on the Amendment to Minister of Finance Regulation No. 141/PMK.010/2021. State Gazette No. 342 of 2022.

Minister of Finance Regulation No. 8 of 2024 on Value Added Tax on the Delivery of Certain Four-Wheeled Battery-Based Electric Motor Vehicles and Certain Battery-Based Electric Buses Borne by the Government for Fiscal Year 2024. State Gazette No. 103 of 2024.

Minister of Finance Regulation No. 12 of 2025 on Value Added Tax on the Delivery of Certain Four-Wheeled Battery-Based Electric Motor Vehicles and Certain Battery-Based Electric Buses and Luxury Goods Sales Tax on the Delivery of Certain Low-Carbon Emission Electric Motor Vehicles Borne by the Government for Fiscal Year 2025.

Minister of Transportation Regulation No. PM 15 of 2022 on the Conversion of Non-Motorcycle Motor Vehicles with Internal Combustion Engines into Battery-Based Electric Motor Vehicles. State Gazette No. 768 of 2022.

Minister of Transportation Regulation No. PM 39 of 2023 on the Conversion of Motorcycles with Internal Combustion Engines into Battery-Based Electric Motorcycles. State Gazette No. 573 of 2023.

Minister of Industry Regulation No. 28 of 2020 on Battery-Based Electric Motor Vehicles in Completely Knocked Down and Incompletely Knocked Down Conditions. State Gazette No. 1042 of 2020.

Minister of Industry Regulation No. 6 of 2022 on Specifications, Development Roadmap, and Calculation of Domestic Component Level Value for Battery-Based Electric Motor Vehicles (Battery Electric Vehicle). State Gazette No. 270 of 2022.

Minister of Industry Regulation No. 7 of 2022 on the Amendment to Minister of Industry Regulation No. 28 of 2020. State Gazette No. 271 of 2022.

PT PLN (Persero), “Partnership SPKLU PLN.” Accessed via: https://layanan.pln.co.id/partnership-spklu.