Astra International (ASII)

Hybrid Incentive are Off for Now

• We just attended a discussion on EV that was hosted by several ministry representatives.
• The govt is supportive of EV offering multiple incentives. We are quite surprised by the easiness in gaining TKDN 40% to obtain the incentives.
• Hybrid subsides, however, are not inline with the government’s goal. This puts ASII at a disadvantage. Reiterate HOLD rating on ASII

EV relaxation: All you need to know

To recap, the government has given multiple tax incentives to EV in Indonesia, in the form of 0% import duty, 0% luxury tax, and a VAT rate as low as 1% for CBU and CKD cars, with TKDN (local content requirement) and an investment commitment as prerequisite. The current prerequisites will be increased in 2026, with further increases in 2027-2029. In addition, the government is also providing exemptions for motor vehicle tax, the motor vehicle transfer fee, and the odd-even traffic policy in Jakarta. These incentives are hoped to result in 400k 4W EV sales by 2025 (2021-3 achievement: 22k).

TKDN equirement: 40% should be easy to achieve with moderate capital

The event also highlighted how to obtain a TKDN level to be eligible for government EV incentives. For 2020-29, local assembly will be calculated at a 30% TKDN rate, before declining to 20% from 2030 onwards. Meanwhile, supporting components would be calculated at a 10% TKDN rate, R&D at 10%, frame and body at 5%, drive train & PCU at 5%, and battery at 40% in 2020-2029 (50% from 2030 onwards). Given the high score that can come from assembly to meet the total TKDN requirement, we believe it is quite easy to claim the first 40% TKDN threshold to claim the benefit. This could be achieved with moderate capex from EV producers, such as the Rp4t spent by Morris Garage (and it required only 1 year to ramp up CKD in their existing facility) and the Rp250b Chery investment to speed up CKD assembly. This should ease the entry of EV into Indonesia, as depicted in the current availability of brands and models in the EV market.

Maintain Hold rating for ASII with a TP of Rp 5,700

The government does not believe that the current conventional hybrid (ran by fuel) models in Indonesia support the spirit of “reducing fuel subsidies” and “cleaner air”, the foundations of current EV policies. Thus, the government does not have any plan to provide subsidies to conventional hybrid models. They might give subsidies for extended rage PHEV, but the model is limited even in global markets. This would put ASII at a disadvantage, given the company is currently promoting conventional hybrids.

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