The Effectiveness Of Tax Incentives On The Attractiveness Of Electric Vehicle Investments In Indonesia: A Case Study Of Tesla

Abstract

This study examines the effectiveness of tax incentives in attracting electric vehicle (EV) investment in Indonesia, focusing on Tesla as a case study. The Indonesian government has introduced various fiscal incentives, including tax holidays, tax allowances, exemption of import duties, and a reduced value-added tax for electric vehicles, to enhance its competitiveness in the EV sector. Using a qualitative descriptive approach with secondary data analysis, this research evaluates the role of these incentives in stimulating investment and market growth. The findings show that tax incentives have contributed significantly to increasing EV sales in Indonesia, with sales growing by 43.4 percent in the first quarter of 2025. Several global producers, such as BYD, Hyundai–LG, and VinFast, have responded positively by establishing production facilities in Indonesia. However, Tesla has not yet made direct investment despite showing interest in Indonesia’s nickel resources. This indicates that fiscal incentives alone are insufficient to attract world-class investors without the support of non-fiscal factors such as regulatory certainty, efficient bureaucracy, and adequate infrastructure. The study concludes that Indonesia’s tax incentives are effective in stimulating EV market development but less effective in securing Tesla’s investment. The implication is that fiscal incentives need to be integrated with non-fiscal measures to create a more attractive investment climate.