EV Industry in Indonesia: Investment Opportunities and Licensing Requirements for Foreign Companies

Indonesia produced more nickel than any other country on earth in 2024. That single fact explains why the country has attracted USD 29 billion in greenfield EV investments since 2020, representing 75% of total EV greenfield capital flows across all of Southeast Asia. No other market in the region comes close.

For foreign companies evaluating where to plant their flag, the EV industry in Indonesia is not just one option among several. It is structurally different from its neighbours, and the reasons go beyond the mineral wealth. The government has built a policy environment that connects nickel processing to battery manufacturing to vehicle assembly to domestic consumption, all within the same investment ecosystem. Understanding how that ecosystem works, and where your company fits within it, is the starting point for any serious market entry conversation.

This article covers the investment landscape as it stands today, the segments that are open to foreign participation, the government incentives currently in play, and what foreign companies need to do structurally and operationally to enter this market correctly.

Why the EV Industry in Indonesia Stands Out

The numbers behind Indonesia’s EV ambition are significant. The government has set a target of 2 million electric four-wheeled vehicles and 12 million electric motorcycles on Indonesian roads by 2030. To support this, it has introduced a sustained run of fiscal incentives, manufacturing commitments, and infrastructure targets that together signal a market in active transition rather than passive aspiration.

EV sales grew 104% in the second quarter of 2024 compared to the same period the year before. Total battery electric vehicle (BEV) sales reached 43,188 units in 2024, representing around 5% of new passenger car sales nationally. That share is still modest, but the trajectory is clear, and the government has consistently backed its targets with policy action rather than just statements.

Indonesia also holds a position that no other ASEAN country can replicate: it is the world’s largest producer of nickel, the critical mineral at the heart of most lithium-ion battery chemistries. This gives the country a natural downstream advantage. The first EV battery manufacturing facility in Southeast Asia opened in Indonesia in 2024, and several more are under development. For foreign companies in the battery supply chain, component manufacturing, or vehicle production, this is not just a consumer market. It is a manufacturing base with real competitive foundations.

Investment Segments Open to Foreign Companies

Not all parts of the EV value chain carry the same entry requirements or opportunities. Understanding which segment your business falls into is the first step toward choosing the right structure and licensing pathway.

EV Vehicle Manufacturing

This covers the production of battery electric vehicles, both four-wheeled passenger cars and two-wheeled motorcycles. Foreign companies entering this segment are expected to commit to domestic production. The government’s incentive architecture has been explicitly designed to push manufacturers toward building local facilities rather than relying purely on imports.

Battery and Component Manufacturing

This is arguably the segment with the most long-term strategic upside given Indonesia’s nickel reserves. Investment here ranges from battery cell production to battery pack assembly to the manufacture of motors, controllers, and other EV components. Several major players, including Chinese manufacturers, are already active in this space, and the competitive window for new entrants remains open.

EV Charging Infrastructure

The deployment of public charging stations (Stasiun Pengisian Kendaraan Listrik Umum or SPKLU) is a high-priority area under Indonesia’s electrification roadmap. The Ministry of Energy and Mineral Resources (Kementerian Energi dan Sumber Daya Mineral or KESDM) has set a charging infrastructure target extending to 2030. For foreign companies in the energy services or infrastructure space, this segment offers a relatively lower capital barrier compared to manufacturing, though it carries its own location-specific licensing requirements.

Distribution and Sales

Foreign companies that want to bring EV products into the Indonesian market through distribution or retail channels also require a properly structured local entity. This segment is particularly relevant for brands that are building toward local manufacturing commitments but need a market presence first.

Government Incentives Currently in Place

Indonesia’s EV incentive framework has been active and evolving since Presidential Regulation No. 55 of 2019 on battery electric vehicles for road transport. For foreign companies assessing the EV industry in Indonesia, understanding which incentives are still active and which have expired is critical to structuring an entry that makes commercial sense. The key incentives relevant to foreign investors today are the following.

VAT Reduction

The Value Added Tax (Pajak Pertambahan Nilai or PPN) on qualifying EV purchases has been reduced from the standard 11% to just 1%. This applies to vehicles produced with a minimum local content threshold and has been one of the most visible demand-side levers the government has used to grow the market.

PPnBM Relief

The Luxury Goods Sales Tax (Pajak Penjualan atas Barang Mewah or PPnBM) has been borne by the government for certain four-wheeled BEV imports under PMK 135/2024. This incentive applies through the end of 2025. From January 2026 onward, the government has confirmed it will no longer issue import permits for completely built-up (CBU) vehicles or provide related tax incentives. This is a material shift in the investment environment.

Import Duty Relief for Committed Manufacturers

Under the scheme active through 2025, foreign manufacturers that committed to establishing domestic production facilities by 2026 were eligible for 0% import duty on both completely built-up (CBU) and completely knocked-down (CKD) vehicles. This was the mechanism that brought BYD and several other manufacturers into Indonesia’s market at scale.

What This Means for Companies Entering Now

The window for the import-led market entry strategy is effectively closing. Companies that entered Indonesia under the CBU incentive scheme are now expected to follow through on their localization commitments. For companies that have not yet entered, the post-2025 environment is one where domestic production is the baseline expectation, not a bonus condition.

This is not a signal to wait. It is a signal to plan the entry properly from day one, with a structure that supports local manufacturing commitments rather than one built around import volumes.

How Foreign Companies Must Structure Their Entry

This is where the practical work begins, and where most of the decisions that determine long-term success are made. The same principle applies across regulated sectors in Indonesia. If you are also exploring opportunities in financial technology, our article on Fintech Licensing in Indonesia walks through a comparable entry framework for that sector.

Indonesian law requires that any foreign company operating commercially in Indonesia do so through a locally incorporated legal entity. For foreign investors, this means establishing a Foreign Investment Company (Perusahaan Terbatas Penanaman Modal Asing or PT PMA).

A PT PMA is the standard and legally recognized vehicle for foreign direct investment in Indonesia. It is the entity that holds licenses, enters contracts, employs staff, and operates at commercial scale.

You cannot distribute EV products, operate a charging network, or manufacture vehicles through a foreign parent entity or a Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA). A Representative Office cannot hold commercial licenses or generate revenue. Its scope is limited to market research and liaison activities. If your goal is to operate in Indonesia’s EV market commercially, a PT PMA is the correct starting point.

The Role of KBLI in EV Investments

One of the most consequential decisions in setting up a PT PMA is selecting the correct Standard Classification of Indonesian Business Fields (Klasifikasi Baku Lapangan Usaha Indonesia or KBLI) code. In Indonesia, your KBLI code is not administrative paperwork. It determines your licensing pathway, your eligibility for government incentives, your foreign ownership limits, and the risk classification of your business under the OSS-RBA (Online Single Submission Risk-Based Approach) system.

For EV companies, the KBLI selection is particularly important because the sector spans multiple activity types. A company manufacturing EV components operates under a different KBLI than one distributing finished vehicles or operating charging stations. Using a broad or mismatched KBLI to simplify the registration process is a mistake that tends to surface later, either at the licensing stage or when applying for sector-specific incentives.

Under Government Regulation No. 28 of 2025 and BKPM Regulation No. 5 of 2025, Indonesia has tightened the risk-based classification system. More KBLI codes are being reclassified into medium or high-risk categories, which means stricter licensing requirements for companies that fall into those classifications. For EV manufacturing and related activities, this is a sector where getting the KBLI right from day one is essential.

Capital Requirements

Under BKPM Regulation No. 5 of 2025, the minimum paid-up capital for a PT PMA is IDR 2.5 billion (approximately USD 150,000). This is a reduction from the previous IDR 10 billion requirement and reflects the government’s effort to lower the barrier for foreign investors.

However, the minimum total investment plan remains above IDR 10 billion per five-digit KBLI code per project location, excluding land and buildings. This is the commitment figure that investors declare in the OSS system and are expected to realize over the course of their operations.

There is an important exception specific to EV charging stations: the minimum investment value for public EV charging station businesses is calculated per province, not per KBLI code. This means a company operating charging infrastructure across multiple provinces needs to account for this calculation in its investment plan from the outset.

Paid-up capital is subject to a 12-month lock-up period from the date of deposit. The funds can be used during this period for asset acquisition, project development, and verified operational expenses, but cannot be withdrawn without specific justification. XPND works with clients on capital allocation strategies during this period to ensure funds are deployed in a way that satisfies both investment realization requirements and LKPM reporting obligations.

XPND handles PT PMA incorporation end-to-end, from KBLI classification and capital planning through OSS-RBA registration and sector-specific licensing. You can read more on our PT PMA (Foreign Investment Company) service page. 

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Ongoing Compliance After Incorporation

Incorporation is the beginning of the compliance journey, not the end of it. Foreign companies operating in Indonesia face a continuous cycle of reporting and administrative obligations that need to be built into the operational structure from day one.

As a PT PMA, you are required to submit Investment Activity Reports (Laporan Kegiatan Penanaman Modal or LKPM) to the Ministry of Investment on a quarterly basis. These reports track capital realization against the investment plan declared at incorporation. Under BKPM Regulation No. 5 of 2025, the LKPM filing deadline has been updated to the 15th of April, July, October, and January each year.

Beyond LKPM, licensed companies carry periodic tax reporting obligations, including corporate income tax, VAT where applicable, and employee income tax withholding. Annual general meeting documentation, corporate secretary functions, and accounting and bookkeeping obligations also run continuously throughout the operational life of the entity.

These are not tasks that can be delegated informally or handled ad hoc as deadlines approach. Building the compliance calendar into your operational plan from day one, rather than reacting to it as deadlines surface, is one of the more practical ways to keep your Indonesian entity running without interruption.

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Bringing Foreign Talent Into Your EV Entity

Most foreign companies entering Indonesia’s EV sector will need to bring in foreign professionals, whether as technical leads, plant managers, C-level executives, or specialized engineers. This process runs in parallel with your corporate setup and licensing, and it has its own requirements that need to be planned early.

Foreign employees working in Indonesia require a Work Permit (Izin Mempekerjakan Tenaga Kerja Asing or IMTA) and a Temporary Stay Permit (Kartu Izin Tinggal Terbatas or KITAS). These are not interchangeable documents. The IMTA is issued by the Ministry of Manpower and authorizes the employment of a foreign national in a specific position. The KITAS is issued by the Directorate General of Immigration and grants the right to reside in Indonesia.

Before the IMTA can be issued, your company must first obtain approval for a Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing or RPTKA) from the Ministry of Manpower. This plan specifies the positions that will be filled by foreign nationals, the justification for each position, and the accompanying commitment to train Indonesian staff for those roles. The RPTKA approval is the precondition for the IMTA, which is then the precondition for the KITAS.

For investor-level positions, an Investor KITAS is available to foreign shareholders with a minimum capital ownership of IDR 10 billion. This provides a long-term residency option that is tied to your investment stake rather than an employment relationship.

Planning the immigration process in parallel with incorporation, rather than treating it as a separate task to be handled after the company is set up, is one of the more practical ways to compress your overall timeline before operations begin.

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The Foundation Has to Be Right

Indonesia’s EV market is genuinely open to foreign investment, and the government’s policy direction over the past several years has been consistently supportive of foreign participation across the value chain. For companies that have done their homework on the EV industry in Indonesia, the structural opportunity is real. But it does not come without structural requirements, and the regulatory environment is moving faster than many companies realise.

The entry decisions that matter most, KBLI selection, entity structure, capital planning, and immigration setup, are made before a single product is sold or a single employee is hired. Getting these right creates a foundation that supports growth. Getting them wrong creates friction that compounds over time.

At XPND, this is the work we are built for. We are a business expansion partner with offices across Jakarta, Bali, Surabaya, Semarang, and Batam, supporting foreign companies through incorporation, immigration, and ongoing compliance in Indonesia. We are not a law firm, and we do not position ourselves as one. We handle the operational and administrative layer so that your team can focus on building your EV business in one of Southeast Asia’s most significant markets.

If you are planning an entry into Indonesia’s EV sector and want to understand what the setup process looks like for your specific situation, reach out to the XPND team for an initial consultation. We respond within 24 hours.