Indonesia's EV Industry Surges with Over $346 Million Investment, Driven by Government Ambition

Indonesia's electric vehicle (EV) industry is experiencing remarkable growth, attracting over US$346 million (Rp 5.77 trillion) in investments across various segments, according to the Industry Ministry. This significant funding underscores the nation's commitment to fostering sustainable transportation and establishing a robust domestic manufacturing base.

The investments are strategically distributed, targeting electric buses, passenger EVs, and two- and three-wheelers, as reported by the Jakarta Globe on November 23, 2025. This multi-faceted approach aims to electrify diverse transportation needs across the archipelago.

Setia Diarta, Director General for Metal, Machinery, Transportation Equipment and Electronics (Ilmate) at the Industry Ministry, confirmed the rapid development during the Gaikindo Jakarta Auto Week (GJAW). Diarta highlighted strong growth in all three EV product categories, reflecting Indonesia's push for a greener industrial ecosystem.

Domestic manufacturers of electric cars have achieved a combined annual production capacity of 110,660 units, backed by Rp 4.23 trillion in investment. Meanwhile, the electric bus segment boasts a capacity of 4,100 units annually with Rp 380 billion invested, as detailed by the Industry Ministry.

The two- and three-wheeler EV sector, crucial for Indonesia's urban mobility, leads in volume with an annual production capacity soaring to 2.51 million units and an investment of Rp 1.16 trillion. This segment is seen as vital for widespread EV adoption due to its affordability and prevalence, as noted by the Institute for Transportation and Development Policy (ITDP).

Indonesia's strategic drive is further supported by ambitious government targets to deploy 2 million electric cars and 12 million electric two-wheelers by 2030, according to reports from Invest in Aceh. These goals are underpinned by a comprehensive suite of incentives and regulatory reforms designed to make EVs more accessible and affordable for consumers.

The nation's abundant nickel reserves, the world's largest, play a pivotal role in attracting global EV players, positioning Indonesia as a critical hub for EV battery production. sinolytics reported in July 2025 that Indonesia now controls nearly 60% of global nickel production, making it a foundational element in the global EV supply chain.

• Strategic Government Incentives and Targets: The Indonesian government has implemented a robust framework of incentives to accelerate EV adoption and manufacturing. This includes the extension of tax incentives for battery electric vehicles (KBLBB) throughout 2025, as reported by Invest in Aceh. Additionally, a Value-Added Tax (VAT) discount, reducing the rate from 11% to 1% for EVs with at least 40% local content, significantly lowers consumer costs, according to a February 2025 analysis. The government aims for 2 million electric cars and 12 million electric two-wheelers on the road by 2030, alongside the full electrification of urban bus fleets, as highlighted by ITDP.

• Nickel Reserves as a Global Magnet: Indonesia's status as home to the world's largest nickel reserves is a primary draw for international investment in the EV sector. These reserves are crucial for lithium-ion battery production, making Indonesia a strategic center for downstream processing and battery manufacturing, according to a May 2025 report. Sinolytics further emphasized in July 2025 that Indonesia's nickel output surged by 1,143% over the past decade, controlling nearly 60% of global production and attracting significant investments from companies like CATL.

• Growing Market and Foreign Investment: The Indonesian EV market is experiencing rapid expansion, with the EV segment growing by 49% in the third quarter of 2025, as per PwC's eReadiness Survey 2025. Major global manufacturers are committing substantial investments; for instance, China's BYD plans a $1.3 billion plant by early 2026, and Bosch has commenced construction on a new EV component factory in Cikarang with a potential investment of US$299 million, according to recent reports. Other significant players like GAC Aion, Citroen, VinFast, and Volkswagen are also establishing or expanding operations, as noted by the Jakarta Globe in May 2025.

• Focus on Local Content and Production: To foster a sustainable domestic industry, the Indonesian government is increasingly emphasizing local content requirements. While incentives for completely built-up (CBU) imported EVs will cease by early 2026, as confirmed by Minister of Industry Agus Gumiwang Kartasasmita in September 2025, the focus will shift to manufacturers committed to local production. This policy aims to strengthen Indonesia's domestic EV supply chain and ensure foreign manufacturers invest in local jobs and technology transfer, according to a February 2025 analysis.

• Challenges and Future Development: Despite significant progress, challenges remain, particularly concerning infrastructure development. PwC's 2025 survey indicated that while government incentives scored high, EV infrastructure lagged significantly. The increasingly crowded market also presents risks of price wars that could erode margins, as highlighted by Agenzia ICE in November 2025. However, the government and industry are prioritizing the expansion of charging networks and fostering public-private partnerships to support the growing EV ecosystem, as reported by IMARC Group.

• Impact on Two- and Three-Wheelers: The electrification of two- and three-wheelers is particularly crucial for Indonesia, given their widespread use. The government's target of 12 million electric two-wheelers by 2030 is supported by incentives like subsidies, which led to a 262% surge in two-wheeled EV sales in 2023, according to IMARC Group. Companies like TVS Motor Company are entering the market with locally assembled electric scooters, further boosting this segment, as reported in June 2025. This focus aims to address rising fuel costs and environmental concerns, making electric two-wheelers an increasingly practical choice for commuters.