Are fiscal incentives enough? Evaluating the effectiveness of Indonesia’s electric vehicle policy

Abstract

Indonesia is at a critical juncture in its transition to Electric Vehicles. Despite a comprehensive fiscal incentive framework enacted through Indonesian Presidential Regulation No. 55 of 2019 and its 2023 amendment, penetration of electric vehicles remains marginal compared to its regional peers, such as Thailand, which is the second largest car market in Southeast Asia. This paper critically evaluates Indonesia’s fiscal incentive policies’ effectiveness for the Electric Vehicles industry through a policy network lens. Drawing on qualitative analysis of primary regulatory instruments, secondary industry data from the Automotive Federation, and prior academic literature, this study maps the multi-actor ecosystem surrounding the fiscal policy on electric vehicles and identifies structural gaps that limit the policy’s impact. Findings reveal that while incentives address both supply (producers) and demand (consumers) sides, their effectiveness is constrained by mass-market price inelasticity, inadequate charging infrastructure, fragmented inter-ministerial coordination, and weak industrial linkages. This study proposes a refined policy network model that integrates stronger actor coordination, targeted demand stimulation, and infrastructure co-investment as prerequisites for a national electric vehicle industry that is commercially viable.