Government Prepares New 2026 Incentives as Outlook for Local Hybrid Cars Strengthens
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JAKARTA, Investortrust.id - The Ministry of Industry prepares a new 2026 fiscal incentive package on Monday, Nov 24, 2025 in Jakarta to support locally produced hybrid cars with high domestic content as the government seeks to maximise economic spillovers from the auto sector, a move expected to narrow the gap with more generous battery electric vehicle tax breaks and lift demand. Analysts said the new framework could strengthen the outlook for local hybrid sales in 2026 after a weak year for Indonesia car sales.
Hybrid electric vehicles still had only a 3 percent luxury tax discount that was scheduled to end this year. That incentive structure lagged far behind support for battery electric vehicles, which included a 10 percent value added tax subsidy, zero luxury tax for local production, and exemptions from key vehicle and registration taxes in many provinces.
Battery electric vehicles that entered Indonesia under test market schemes also enjoyed a 50 percent import duty reduction until the end of 2025. The imbalance in treatment came as national auto sales fell 10.6 percent year on year by October 2025.
Senior researcher Riyanto from the Institute for Economic and Social Research at the University of Indonesia said the policy mix for hybrids was still not fair. "This segment needs a policy that is more fair based on emission reduction and local content. Incentives for HEV are not fair," he said in a written statement on Monday, Nov 24, 2025.
Local hybrid production had continued to grow across major brands. Honda assembled the HR-V e:HEV at its plant in Karawang, Wuling produced the Almaz Hybrid in Bekasi, and Toyota launched the New Toyota Veloz HEV with more than 80 percent local content, after earlier rolling out the Kijang Innova Zenix HEV in 2022 and the Yaris Cross HEV in 2023.
The expansion of hybrid lines created thousands of jobs across factories and domestic supply chains. The segment also formed a bridge technology for consumers not yet ready to switch fully to battery electric vehicles.
Riyanto said he expected the hybrid market to improve once current incentives for fully imported battery electric vehicles expired. "Next year HEV will be better than this year. My estimate is HEV can reach 5 percent market share," he said.
He added that regional markets outside major urban centres were more suitable for hybrid cars because public charging infrastructure for battery electric vehicles remained limited. "Hybrid needs more outreach to regions, especially outside Java," he said.
Riyanto argued that the government should both extend and strengthen incentives for hybrid producers that deepened their use of domestic components. "Hybrid incentives should be continued and supported with increased local component production," he said.
Automotive analyst Bebin Djuana also said fiscal policy needed to give hybrids more priority if Indonesia was serious about cutting emissions. "If the focus is on emissions, hybrid must be considered. Taxes should be reduced so the hybrid market grows," he said.
Industry Minister Agus Gumiwang Kartasasmita had repeatedly stressed that the automotive sector had wide linkages with other industries and absorbed a large workforce. The ministry was drafting detailed proposals for the 2026 fiscal package aimed at preserving investment, safeguarding employment, and ensuring that both hybrid and battery electric vehicles contributed to Indonesia green industrial strategy.