JAKARTA: Industry players have welcomed plans to reinstate purchasing subsidies for electric two-wheelers as the government looks to reduce reliance on imported fossil fuels that have become increasingly costly amid ongoing tension in the Middle East.
Indonesian Electric Motorcycle Industry Association (Aismoli) chairman Budi Setiadi said the plan came at the right moment.
Not only could the policy help “reduce pollution and emissions”, but it would also save budget spending on fuel subsidies, Budi told The Jakarta Post on April 27.
The US-Israeli war against Iran has sent global oil prices up sharply, forcing the government to fork out more to keep pump prices of subsidised fuels unchanged for consumers.
Large volumes of diesel and petrol are sold at fixed prices that are typically far lower than global prices, with the state covering the difference through energy subsidies and compensation for state-owned companies PT Pertamina and PT Perusahaan Listrik Negara.
“If the number of vehicles keeps growing, so does the subsidy (bill for the government),” Budi noted, but subsidies for electric vehicle (EV) purchases could help cut subsidy spending “in the short term”.
The 2026 budget plan is based on an assumed global oil price averaging US$70 per barrel and a rupiah exchange rate averaging around 16,700 rupiah per US dollar, but with oil currently above US$100 and the rupiah below 17,000 rupiah, the fiscal calculation is under severe strain.
Around a week after the first missiles in the Iran war were fired on Feb 28, the government stated that it sought to expedite the energy transition by expanding solar power generation capacity and converting some of the country’s 120 million motorcycles from internal combustion engines to batter-powered ones.
Finance Minister Purbaya Yudhi Sadewa revealed on April 24 that the latest plan was for the state to cover five million rupiah (US$288) per purchase of up to six million EV two-wheelers this year.
That goal would be achieved gradually, Purbaya said, without specifying a time frame.
However, he added that those numbers had yet to be finalised, since the regulation for the policy was still being formulated, with input from the Industry Ministry and the Office of the Coordinating Economy Minister.
Industry Minister Agus Gumiwang Kartasasmita told reporters last Tuesday that technical teams from his and Purbaya’s ministries were hashing out the details.
He said five million rupiah per unit “was a good position” to start with but declined to reveal how many units might be covered, explaining that the final numbers would be based on the subsidy allocation approved by Purbaya, which was to be stated in a Finance Ministry regulation.
Asked whether the government would subsidise EV cars as well, Agus said “it is a must; all (vehicles) will be EV-based”, adding that when the government designed the EV transition programme in the past, it was still based on an “emission reduction framework, which is still important”.
“However, now, with the experience of the Strait of Hormuz disruption, (the programme) can be linked to energy security, which is probably more imperative.
“Energy security reduces our dependence on fuel imports.”
He praised the subsidy plan as “a good signal from the government to the market”.
In 2023 and 2024, under the previous presidential administration, the government rolled out similar policies that covered tax incentives for electric car owners alongside a consumer subsidy of seven million rupiah per two-wheeler EV purchase.
The programme was presented as part of a multi-pronged strategy to push Indonesia to the forefront of the global transition toward EVs, flanked by the government’s downstream industry road map based on Indonesia’s abundant nickel reserves, a key material for the production of EV batteries, particularly in the high-end segment.
Motorcycle EV sales skyrocketed to 62,409 and 77,078 units in 2023 and 2024, respectively, from less than 28,000 in the previous two years combined.
However, sales plummeted to just 55,059 units in the following year, after the subsidy stopped.
Aismoli’s Budi attended a meeting with the Industry Ministry to discuss this year’s subsidy plan and said the government had set 101,000 units as the 2026 goal. — The Jakarta Post/ANN
