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Government Incentives for Electric Vehicles: Is it Really Necessary?

The government is planning to provide incentives for every purchase of electric vehicles that are manufactured in Indonesia. The amount of it will be 80 million rupiah for electric cars and 40 million rupiah for hybrid-based electric cars. Meanwhile, for the purchase of a new electric motorbike, an incentive of 8 million rupiah will be given and the conversion of motorbike to an electric motorbike will be 5 million rupiah.

President Joko Widodo expects the electric vehicle industry in Indonesia will grow with these incentives. Minister of Industry, Agus Gumiwang Kartasasmita, also stated that these incentives would encourage purchases and 'force' manufacturers to invest domestically given the growing opportunities for the electric vehicle industry in Indonesia.

The use of electric vehicles is considered more efficient in terms of taxes and energy consumption. One liter of car fuel with a distance of 10 kilometers is equivalent to the use of 1.5 kWh of an electric car. Meanwhile, the carbon emission of one liter of fuel is equivalent to 2.6 kg of CO2, and carbon emissions of 1.5 kWh are equivalent to 1.27 kg of CO2. It can be concluded that the use of electric vehicles is more environmentally friendly and reduces CO2 emissions by 50%. In terms of taxes, the government also provides local tax rates (PKB and BBNKB) lower than for fossil-fuel vehicles.

However, is this incentive really necessary?

Many economists around the nation are still doubtful about the urgency of subsidizing electric vehicles initiated by the government as an incentive to reduce CO2 carbon emissions. They consider these incentives are not too urgent and do not provide a multiplier effect for the domestic economy. In addition, the government only talks about the supply side without knowing whether it will lead to high demand or not. Then, the energy transition cannot just be carried out simply by switching to electric vehicles but also by providing incentives for coal as primary energy so that air pollution reduction can actually be implemented.

Sources :,,,

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