Electric Car Boom Accelerates, Local Content Gap Emerges as Core Test

JAKARTA, Investortrust.id — Indonesia’s electric vehicle market has expanded rapidly heading into 2026 in Jakarta as sales momentum, foreign investment, and new model launches reshaped the automotive landscape, even as weak local content and policy uncertainty emerged as structural constraints on the industry’s long-term impact.

Electric vehicle adoption recorded double-digit growth in late 2025, turning EVs into the main buffer for an automotive market facing softer purchasing power and global economic uncertainty.

Data from the Association of Indonesian Automotive Industries (Gaikindo), the main industry body representing vehicle manufacturers, show that this surge marked a structural shift, with EV wholesale deliveries overtaking the Low Cost Green Car segment, which had been the backbone of Indonesia’s passenger car sales for more than a decade as the country’s dominant mass-market category.

Automotive analyst Yannes Martinus said the industry had entered a transition phase where sales growth no longer guaranteed industrial resilience.

“Sales of EVs are growing, but structurally the industry remains fragile,” Yannes said on Saturday, Jan 3, 2026. “Key components such as batteries and powertrain systems are still dominated by imports.”

Government policy requires minimum local content, or TKDN, for electric vehicles to qualify for incentives, but implementation has varied widely, particularly among new market entrants.

According to Yannes, production expansion has not been matched by upstream industrial strengthening, raising the risk that Indonesia could become largely an assembly base rather than a full manufacturing hub.

Beyond components, local manufacturers also face gaps in skilled labor and advanced manufacturing technology, making technology transfer a critical requirement for domestic supply chains to mature.

Policy uncertainty has compounded these challenges. Finance Minister Purbaya Yudhi Sadewa said the government had not yet received a formal proposal to extend EV incentives into 2026, signaling that fiscal support may not automatically continue.

“I have not received the final proposal from the ministry,” Purbaya said on Wednesday, Dec 24, 2025. “We will first evaluate the impact of previous incentives on sales, industry, and employment.”

Purbaya added that recent improvements in vehicle sales were driven more by recovering purchasing power than by incentives alone, suggesting subsidies would face closer scrutiny.

Industry officials at the Ministry of Industry also indicated that import incentives for battery electric vehicles could expire at the end of 2025, in line with existing regulations, unless new coordination took place.

Despite the policy overhang, EV demand has remained resilient. Data showed national EV sales jumped 12% toward the end of 2025, positioning Indonesia as one of Southeast Asia’s fastest-growing electric vehicle markets.

The surge has been led by Chinese manufacturers BYD and DENZA, which together controlled about 57% of Indonesia’s EV market.

BYD alone sold more than 47,300 electric vehicles between January and November 2025, exceeding total national EV sales recorded in all of 2024.

“BYD Indonesia is pleased to contribute as a main pillar of the ecosystem, with sales of more than 47,000 units or supporting over 57% of electric vehicles nationwide,” said BYD Motor Indonesia President Director Eagle Zhao on Monday, Dec 15, 2025.

The company maintained stable monthly distribution of around 10,000 units in the final quarter of 2025, supported by a broad product portfolio spanning compact, MPV, SUV, and premium segments.

The Atto 1 emerged as one of the most popular low hatchback EVs, selling more than 17,700 units in just two months, while the M6 MPV and Sealion 7 SUV strengthened BYD’s presence across higher-volume categories.

DENZA reinforced its premium positioning through the D9 electric MPV, which sold more than 7,000 units, targeting affluent urban consumers with high-end features and cabin space.

The influx of foreign EV brands has also attracted manufacturing investment, including new production facilities and final assembly plants, signaling Indonesia’s appeal as a regional EV base.

However, analysts warned that without a rapid increase in domestic battery, drivetrain, and electronic component production, the broader economic benefits of EV growth would remain limited.

“EVs should not only be about sales figures,” Yannes said. “If TKDN does not rise significantly, the contribution to the national economy will stay constrained.”

For 2026, the automotive outlook remains mixed. Conventional vehicle sales are expected to stay under pressure, while EVs are projected to grow at a double-digit pace and serve as the industry’s main stabilizer.

Yet the sustainability of that growth will hinge on three variables: policy clarity on incentives, accelerated development of local supply chains, and successful technology transfer to Indonesian manufacturers.

As Indonesia positions itself within the global EV race, the coming year will test whether the country can move beyond consumption-led growth toward deeper industrialization.