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Indonesia plans overhaul of vehicle rules to form electric-car hub

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Indonesia is planning a slew of incentives for electric-car manufacturers and drivers, to help bolster a sector that has already attracted investment from Toyota Motor Corp and SoftBank Group Corp, according to a draft government strategy seen by Bloomberg.

[JAKARTA] Indonesia is planning a slew of incentives for electric-car manufacturers and drivers, to help bolster a sector that has already attracted investment from Toyota Motor Corp and SoftBank Group Corp, according to a draft government strategy seen by Bloomberg.

The measures are aimed at accelerating the adoption of battery-powered cars in Indonesia and building a base for the production and export of such vehicles. They include lower taxes for manufacturers and buyers of electric cars, and benefits for EV (electric vehicles) owners, such as special parking areas, the draft that's only awaiting the president's approval shows.

The country is vying with nearby Singapore and Thailand to become the dominant force in South-east Asia for electric cars, part of an effort to fortify the local economy and reduce reliance on imported oil. Indonesia, one of the largest untapped markets for electric vehicles, wants EVs to constitute a quarter of its car production by 2030 as it tries to bring in more global companies.

President Joko Widodo is set to sign the new rules into force "very soon", Finance Minister Sri Mulyani Indrawati said on Tuesday. Teten Masduki, head of the presidential special staff, declined to comment, while a presidential spokesman, Erlin Suastini, didn't return calls.

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The rules would change taxation of vehicles so they would be levied based on fuel consumption and carbon emissions instead of body type and engine size, favouring electrified vehicles. Under current rules, a US$65,000 BMW X3 sDrive sport utility vehicle carries a lower luxury tax rate than a US$58,000 Hybrid-powered Toyota Camry because sedans have been considered a more luxurious car type.

The new rules will also require carmakers to gradually increase the amount of locally produced parts to 80 per cent by 2029, according to the draft. Motorcycle producers would need to meet that requirement already in 2026.

A number of global carmakers have decided to commit billions dollars worth of investment even before the new rules have kicked in. Toyota, which has the biggest market share in Indonesia, has said it plans to spend US$2 billion to build hybrid vehicle plants in the country.

Hyundai Motor Co is set to build two plants, including an electric-vehicle unit, in Indonesia by investing US$1 billion, according to Indonesian Coordinating Minister for Maritime Affairs Luhut Pandjaitan. SoftBank said this week it will invest US$2 billion in Indonesia through ride-hailing giant Grab over the next five years and plans to explore investment opportunities in the country's electric-vehicle, battery and renewable energy sectors.

BLOOMBERG