Government Prepares New Incentives To Boost Automotive Industry In 2026

JAKARTA - The government through the Ministry of Industry (Kemenperin) stated that it is proposing an incentive policy for the automotive sector in 2026. The submission will be submitted to the Coordinating Ministry for Economic Affairs as part of a fiscal policy package next year.

Minister of Industry Agus Gumiwang Kartasasmita, explained that this step was taken to accelerate the recovery and strengthening of the national automotive industry, which is currently facing purchasing power in the domestic market and global market dynamics. According to him, the automotive sector should be a concern.

"We at the Ministry of Industry see that the automotive sector is too important to ignore. High multiplier effect, both future and backward (backward and forward linkage) sub-sectors to other sectors in the national economy, and in it there is also high employment, we make a decision to propose incentives for this sector. Almost similar to the automotive incentives at the time of Covid 19," said Agus Gumiwang in his official statement, quoted on Saturday, November 15.

Agus said the Ministry of Industry is preparing an incentive scheme and stimulus that is right on target, both to encourage demand and maintain production utilization and protect industrial investment. The proposal will later be discussed together and submitted officially through the Coordinating Minister for the Economy.

"The Ministry of Industry is now in the process of formulating a proposal that will be submitted by the government, in this case the Coordinating Minister Ekon. We are working on incentive policies and stimulus for the automotive sector which we will propose for the 2026 fiscal policy," Agus explained.

The Minister of Industry emphasized that the main focus of this incentive proposal is to protect workers from termination of employment (PHK) and create new jobs in the automotive sector. In addition, in order to maintain the sustainability of investment in the automotive industry in Indonesia.

"We hope that the automotive sector will receive special attention, so that there is protection for existing workers and create new jobs. At least, through the 2026 fiscal policy, the automotive sector can grow much faster, contribute more to manufacturing growth and national economic growth," he added.

The Ministry of Industry noted that the automotive industry is one of the mainstay sectors with a large contribution to gross domestic product (GDP) in manufacturing, export, and employment. Investment in this sector is estimated to have reached around Rp. 174 trillion, with the absorption of nearly 100 thousand workers directly in the four-wheeled, two-wheeled, and three-wheeled vehicle industries.

In addition, millions of other workers are involved along the automotive value chain, ranging from component suppliers, logistics, to official and unofficial sales and workshop networks. According to him, if the automotive sector is disrupted, the impact could be on many industries.

The formulation of the incentive proposal for 2026 also considers the transition to existing policies, especially related to low-emission and electrification vehicles. Currently, the Government-Borrowed Value Added Tax (PPN DTP) incentives for battery-based electric vehicles and some bus vehicles are regulated through fiscal policies that are valid until 2025.

Agus added that the 2026 incentive proposal will be synergized with the agenda of developing an electric vehicle ecosystem. Including, plans to continue and improve incentives for the purchase of electric motorcycles that have previously been launched by the government.

The Ministry of Industry continues to strengthen dialogue with automotive industry players, associations, and relevant stakeholders in finalizing the incentive proposal.

"We will continue to coordinate with the Coordinating Ministry for Economics, the Ministry of Finance, as well as associations such as GAIKINDO and other industry players. The final goal is clear: maintaining competitiveness, strengthening the supply chain ecosystem for automotive production in the country, and ensuring the automotive industry remains a motor for growth and job creation," concluded Agus.