Government Changes Incompletely Knock Down (IKD) Import Duty Tariffs, an Indication of Switching to Electric Cars?


The government through the Ministry of Finance issued PMK No.13/2022 regarding the fourth amendment to PMK No. 6/2017. The amendment discusses many things, especially regarding the type of target for exemption from import duty tariffs on motorized vehicles.

In the third amendment regulation, namely PMK No. 17/2020, regarding Incompletely Knock Down or IKD motorized vehicle products, it still refers to the Minister of Industry Regulation No. 37/2017, while the latest regulation from the Ministry of Finance has referred to Permenperin No. 23/2021 and amendments to Permenperin No. 37/2021.

The basic thing is that when referring to Permenperin No. 23/2021, importers of IKD will be subject to tariffs that are generally accepted (most favored nation) on imports of exempt components. While in Permenperin No. 37, the import of exempt components is subject to tariffs according to the appropriate tariff headings.

Furthermore, the substantial changes to PMK No. 13/2022 located in the application of exemption from motorized vehicle import duties in IKD form are only for electric battery technology-based products. Because specifically in this latest regulation, the Ministry of Finance requires the importation of IKD that meets the provisions of the Minister of Industry No. 28/2020 concerning Battery-Based Electric Motor Vehicles in a Completely Decomposed State (CKD) and In Incomplete Decomposition.

As stipulated in the regulation, the difference between CKD and IKD is in the completeness of components and manufacturing processes. In Permenperin 28/2020, the IKD manufacturing process includes at least two activities out of 10 specified manufacturing processes, namely body molding, body joining, painting, cabin manufacture or assembly, chassis, electric motor, garden, battery, as well as assembly and testing as well as quality control.

While the CKD manufacturing process includes at least two processes, namely assembly and testing, and quality control. CKD mandatory import components consist of the main components in the form of a frame or body, battery, and drive train system.

On the other hand, for IKD, 29 components are exempt from imports. The collection of components includes coolers (radiators/fans), control cables, shock absorbers, seats, ceilings, seat belts, jacks, bumpers, leaf springs and spirals, horns, and emblems.

The implementation of this regulation also ended the exemption of import duties for imports of IKD widely but became specifically for cars with BEV technology. This has the effect of significantly reducing tariffs.

For example, when compared to imports of bus-type motor vehicles imported in the form of CKD (HS 8702), the tariff is 10 percent. Meanwhile, if you use the IKD import facility (HS 9801), the tariff is 0 percent or free.

Likewise, for passenger vehicles of the 4×2 type imported by CKD (HS 8703), they have to pay an import duty rate of around 10 percent. On the other hand, if it is in the form of IKD according to PMK No. 13/2022, the tariff is also 0 percent.

This is indeed in line with the government’s desire to boost the production and local market of electric vehicles, known as Battery Technology Electric Motorized Vehicles (BEV).

On the other hand, despite receiving special facilities related to zero percent entry fees as well as zero percent PPnBM, the popularity of battery-based electric cars still depends on market prices.

“Our society’s acceptance is still large in the price of cars with a range of IDR 250 million-350 million,” said Jongkie D Sugiarto, Chairman of the Indonesian Automotive Industry Association (Gaikindo).

Furthermore, so far the price of BEV products circulating in Indonesia is still set at around IDR 500 million-650 million. The calculation is that with the exemption of import duties of up to zero percent, the price of BEV is estimated to decrease by a maximum of around Rp. 50 million.