Indonesia is considering offering incentives to Toyota Motor if the Japanese automaker relocates its main vehicle production hub from Thailand to Indonesia, as the government aims to expand the country's automotive manufacturing sector and domestic supply chain.

Speaking at the 2026 Gaikindo Indonesia International Auto Show (GIIAS) in Tangerang, Banten, Finance Minister Purbaya Yudhi Sadewa said the government would provide the necessary support if Toyota relocated its principal manufacturing operations to Indonesia.

"We will support Toyota, but they must bring their main manufacturing operations from Thailand to Indonesia. We will provide all required incentives," Sadewa said.

He also urged Toyota to relocate its supporting industries to Indonesia, noting that many of the materials and components used by domestic automakers are still imported.

Steel, electronics and chemical products remain among the key inputs sourced from overseas.

"If you bring your supporting industries here, we will provide sufficient, or even greater, incentives," Sadewa added.

According to Sadewa, Indonesia's automotive industry currently employs about 1.5 million workers and produces around 2.5 million vehicles annually.

He acknowledged that Indonesia may not previously have offered sufficient incentives or maintained an investment climate attractive enough for foreign manufacturers, adding that the government intends to improve both.

"Perhaps we previously did not provide enough incentives to foreign investors, or our investment climate was not mature enough. We will seriously improve it," he said.

Alongside efforts to attract new manufacturing investment, the government is preparing a new round of incentives aimed at increasing electric vehicle (EV) adoption.

Sadewa said President Prabowo Subianto is expected to announce the new measures within the next two to three weeks.

"I believe the president will launch stimuli in the next two or three weeks for EVs, including around 500,000 electric two-wheelers and electric cars," he said.

The incentives are intended to cover approximately 500,000 electric two-wheelers and electric cars.

According to the minister, the package will include a luxury goods sales tax exemption of up to 100%, while the government will also bear 40% of the value-added tax (VAT) for eligible vehicles. He added that the complete framework would be disclosed when the programme is officially launched.

The incentives are expected to apply only to battery electric vehicles (BEVs), with hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) excluded from the scheme.

"From what I heard, the plan is to cover only (pure) EVs," Sadewa said.

He further added that incentive levels would also vary depending on battery technology, with nickel-based and lithium-based battery EVs receiving different levels of support.

"There will also be a slight difference in incentives between nickel-based and lithium-based battery EVs," he said, adding that President Prabowo would announce the final details.

The government had initially planned to introduce the EV purchase incentives in June. However, the rollout was postponed following a restructuring of the programme, shifting from individual purchase subsidies to company-specific allocations. Earlier plans targeted 100,000 electric cars and 100,000 electric two-wheelers.

Sadewa said supporting EV adoption would help reduce Indonesia's dependence on crude oil imports, particularly amid rising global oil prices driven by geopolitical tensions, including the conflict between the United States and Iran.

He further added that the government aims to increase consumer demand while improving the investment climate for automotive manufacturers.

"The government remains committed to providing fiscal support that is both tangible and predictable," he said.

The incentive programme is also aligned with Indonesia's 2027 Macroeconomic Framework and Fiscal Policy Principles (KEMPPKF), which incorporate national car and two-wheeler development into the country's downstream industrialisation strategy.

Industry Minister Agus Gumiwang Kartasasmita previously said the government intends to prioritise incentives for EVs manufactured by national brands. However, the government has yet to clarify whether the term refers exclusively to Indonesian-owned companies or also includes foreign manufacturers producing vehicles with high domestic content.

The Institute for Development of Economics and Finance (Indef) said the proposed policy could increase activity in the automotive industry and support the country's transition towards electric vehicles.

Indef Executive Director Esther Sri Astuti said the incentives could encourage wider EV adoption but stressed that complementary measures would be needed. These include support for university EV projects, investment in battery manufacturing, the expansion of charging infrastructure, and incentives for manufacturers to encourage the mass production of affordable electric vehicles.

Meanwhile, Minister of Energy and Mineral Resources Bahlil Lahadalia said incentives for nickel-manganese-cobalt (NMC) battery-powered EVs form part of the government's policy for nickel-based electric vehicles.

He said lithium iron phosphate (LFP) battery-powered EVs are not a priority because Indonesia lacks the raw materials required to manufacture them domestically, while the country is building a nickel-based battery production ecosystem.

"LFP is usually suitable for short-distance travel, but nickel remains more reliable for long-distance travel," Bahlil said, adding that, despite their higher cost, nickel-based EVs remain superior overall.

Earlier, in May 2026, Sadewa announced that the government was preparing incentives targeting 100,000 electric cars and 100,000 electric two-wheelers during the year.

Under the earlier proposal, electric two-wheelers would receive incentives of IDR 5 million (US$ 275) per unit, while electric cars would qualify for government-borne VAT covering between 40% and 100%, depending on the battery type used. The incentives would apply exclusively to BEVs and exclude hybrid models.

Coordinating Minister for Economic Affairs Airlangga Hartarto said the EV incentives would eventually be aligned with national development programmes for electric two-wheelers and electric cars.

The Indonesian government continues to review the incentive framework as part of its plans to increase EV sales and expand the domestic EV ecosystem. However, a final decision on the structure and implementation timeline has yet to be announced.