Indonesia, a top supplier of a key battery metal, is aiming to boost sales of electric vehicles (EV) with a new regulation that would cut tax breaks for hybrid cars.
Battery-powered electric vehicles would retain their zero percent luxury tax rate, while plug-in hybrid vehicles would see their tariff increase to 5 percent from zero percent, according to a draft regulation issued by the Indonesian Ministry of Finance yesterday.
Full and mild hybrid types would be taxed at a rate of 6 to 12 percent, compared with a previous range of 2 to 12 percent.
The new rates would apply only to locally produced vehicles.
This is the latest in a series of initiatives that Indonesia has unveiled to meet its ambition to become a global EV battery hub.
The country wants to expand its role as a major source of nickel — used in the batteries — to also producing other components as demand for greener transport skyrockets across markets like the US, China, Japan and Europe.
Higher rates would set in in two years after the battery-
powered electric vehicle sector realizes investments of 5 trillion rupiah (US$347 million), or when it starts commercial production with an investment of the same amount.
After this, plug-in hybrids would be taxed at a rate of 8 percent, while other hybrids would see a tariff of 10 to 14 percent, the draft rules showed.
While Indonesia has caught the attention of the world’s major battery makers, the government is also keen to prop up the usage of electric vehicles in the fossil-fuel dependent country, especially where traditional and hybrid cars remain cheaper.
Only 120 electric vehicles were sold there last year, about one-10th of the sales of hybrids, industry data showed.
Indonesia, among the countries most vulnerable to climate change, has shown renewed focus on reducing its carbon emissions, with the government weighing incentives for clean-energy use and expanding its renewables sector.
The transport sector accounts for nearly 30 percent of the nation’s total emissions, with land transport comprising bulk of it.
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