The optimal tax incentive and subsidy to promote electric trucks in Indonesia: Insight for government and industry

Abstract

This study aims to develop a mathematical model to encourage electric trucks and charging stations by providing tax incentives and subsidies in Indonesia. This study contributes to research on tax incentives and subsidies due to the need for more research on optimizing the optimal number of electric trucks and charging stations based on cost trade-offs for diesel and electric trucks. We consider carbon emission caps to limit the number of diesel trucks. This study examines the types of electric and diesel trucks consisting of multiple brands with these types of trucks. Total cost is formulated as the total investment cost of the electric truck and charging stations, the cost of operating and maintenance, diesel truck investment cost, carbon cost, and operation cost of charging stations. A numerical example and sensitivity analysis are illustrated to verify the proposed model and provide managerial insight for government and industry. The results show that a tax incentive of 36.0% without subsidies will not attract to purchase of electric trucks. In contrast, when incentives reach 36.5% to 40.0% and various subsidies ($1000 to $25,000), then electric truck skyrocket. In the year 2030, it is expected that about 477 trucks will be on the road in Indonesia and requiring the addition of 360 and 103 regular and fast charging stations, respectively.