The government of Indonesia is preparing a new initiative to provide incentives for electric vehicles based on the Domestic Component Level (TKDN). Under the proposed scheme, the higher the local content of an electric vehicle, the greater the manufacturer's potential to receive government support and incentives.

Industry Minister Agus Gumiwang Kartasasmita said the government is studying the scheme as part of efforts to strengthen the national electric vehicle industry.

"Mr. Luhut directed us to explore ways to provide incentive programs based on strengthening the domestic content (TKDN). So, the higher the TKDN, the more government attention it requires, including preparations for providing incentives," Agus said in Subang on September 3rd.

The Ministry of Industry (Kemenperin) will soon design the scheme and coordinate it with relevant ministries and institutions. The policy is expected to encourage electric vehicle manufacturers not only to increase production in Indonesia but also to increase their use of domestically manufactured components.

Domestic component levels for electric cars to increase gradually

Agus said strengthening TKDN is an important part of developing the battery-based electric motor vehicle (KBLBB) industry. Based on the KBLBB development roadmap, the minimum TKDN value will be increased gradually.

Electric vehicles are targeted to have a minimum TKDN of 40% by 2026. This will then increase to a minimum of 60% during the 2027-2029 period, before reaching a minimum of 80% from 2030.

According to the Minister of Industry, increasing TKDN is necessary to ensure that investment in electric vehicles does not stop at vehicle assembly activities. The government wants more domestic component, material and supplier industries to become involved in the electric vehicle production chain.

"For us, the government, success in the domestic market must also go hand in hand with strengthening the domestic manufacturing base," Agus said.

With a TKDN-based incentive scheme, the government also hopes to encourage manufacturers to increase their use of local components. At the same time, the policy is expected to attract global suppliers to establish production facilities in Indonesia.

BYD's domestic component content has reached 40%

Agus cited BYD's development as an example of an electric vehicle manufacturer that has increased its manufacturing activities in Indonesia. BYD products are also said to have local content (TKDN) of more than 40%.

This achievement also positions BYD as the market leader for electric motor vehicles in Indonesia, with a market share of 43%. If the TKDN-based incentive scheme is implemented, local content achievement would not only serve as a measure of domestic production levels but could also become a factor in determining the level of government support available to electric vehicle manufacturers.