Automotive Incentives Under Review as Government Readies Rp 13 Trillion Ramadan Stimulus

JAKARTA, Investortrust.id — Indonesia is reviewing new automotive incentives on Thursday, Jan 29, 2026 in Bandung as the government seeks to revive a sluggish vehicle market while maintaining fiscal discipline, with officials hoping the policy can take effect before the Ramadan fasting period. The move comes alongside preparations for a broader Rp 13 trillion stimulus package aimed at supporting household consumption ahead of Idulfitri.

Industry Minister Agus Gumiwang Kartasasmita said his ministry had submitted a detailed incentive proposal to the Finance Ministry, stressing the urgency of policy support to unlock pent-up demand in the automotive sector. He said faster implementation would help market activity recover, but acknowledged the need for prudence given fiscal constraints.

“From our side, of course we want it as soon as possible so the market can move faster, but we also respect and understand the Finance Ministry’s extra cautious stance in issuing fiscal policies,” Agus said after attending the Indonesia Semiconductor Summit 2026 in Bandung, West Java.

Agus said the Finance Ministry’s caution was linked to the state’s fiscal capacity and careful cost-benefit analysis of each incentive scheme. He said the Industry Ministry had presented comprehensive assessments to ensure any policy would generate measurable economic impact.

The proposed automotive incentives for 2026 were designed with far greater detail than previous schemes, covering vehicle technologies and usage segments to ensure targeted support. Agus said local content requirements, known as the domestic component level, could also become a key consideration in determining eligibility.

“Various aspects are included, but what is certain is that it is far more detailed, so if the incentives are approved by the Finance Ministry, they will be well targeted,” he said.

In 2025, the Indonesian government provides a comprehensive suite of fiscal incentives to accelerate the growth of its automotive industry, with a heavy emphasis on electric vehicles (EVs).

Key measures include a 10% Value-Added Tax (VAT) discount for locally produced EVs with a domestic content (TKDN) of at least 40%, reducing the consumer tax burden to just 1%. Additionally, hybrid vehicles benefit from a 3% luxury goods sales tax (PPnBM) incentive. For manufacturers, the government maintains 0% import duties and 100% PPnBM exemptions for certain completely built-up (CBU) and completely knocked-down (CKD) electric cars throughout the year.

These fiscal supports, paired with non-fiscal perks like exemptions from "odd-even" traffic restrictions and lower vehicle ownership taxes, are designed to transition Indonesia into a regional hub for sustainable mobility before most import-related incentives expire at the end of December 2025.

In 2025, Indonesia’s automotive incentives acted as a critical stabilizer, driving a 49% surge in electric vehicle (EV) sales even as the total national market contracted by 17.9%.

By effectively lowering the VAT to 1% for local EVs and offering luxury tax (PPnBM) breaks for hybrids, these measures successfully buffered the industry against high interest rates and the general 12% VAT hike. This fiscal support pushed the electrified vehicle market share to nearly 18% and triggered a massive year-end sales spike as consumers rushed to utilize import duty exemptions before they expired in December.

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No Electric Motorcycle Incentives

Agus also confirmed that the government would not provide sales incentives for electric motorcycles in 2026, a decision taken to preserve fiscal space and prioritize policies with higher short-term economic returns. He said incentives for electric motorcycles had not been proposed this year.

“Electric motorcycles will not receive incentives this year. They were not proposed,” Agus said, adding that policy certainty was needed to avoid market speculation.

He said the government was balancing short-term market stabilization with long-term industrial strategy, noting that electric motorcycles would remain part of a longer-term roadmap. Agus said incentives for the segment could be reconsidered in 2027 once fiscal conditions improved.

Ramadan & Idulfitri Stimulus Package

The discussion on automotive incentives coincided with the government’s plan to roll out a broader stimulus package ahead of Ramadan and Idulfitri. Coordinating Minister for Economic Affairs Airlangga Hartarto said the government had allocated around Rp 13 trillion to support household purchasing power during the festive period.

“The range is around Rp 13 trillion,” Airlangga said at his office in Jakarta, outlining measures including transportation fare discounts and social assistance.

He said the stimulus would include discounts across air, rail, sea, and land transportation, as well as social assistance in the form of rice and subsidized cooking oil under the Minyakita program. He said several programs were already prepared and would be finalized soon.

Airlangga said the scale of incentives ahead of Idulfitri this year could exceed last year’s package, although specific allocations were still being finalized. He said the government was also coordinating closely with economic ministries and the central bank to keep inflation within the state budget target.

“The conclusion is that the government continues to maintain inflation in line with the APBN target of 2.5%, plus or minus 1%,” he said after a coordination meeting involving Bank Indonesia and key cabinet members.