Gaikindo Optimistic That Car Sales Will Reach 3 Million Units Per Year, As Long As The Government Does This

General Secretary of Gaikindo Kukuh Kumara. (Photo: Theresia Agatha/VOI)

JAKARTA - The Association of Indonesian Automotive Industries (Gaikindo) is optimistic that national car sales can reach 3 million units per year as long as the government can evaluate incentive policies in the automotive sector.

General Secretary of Gaikindo Kukuh Kumara said that the right tax incentives could be a catalyst to boost national car sales in the short term while strengthening the long-term automotive industry basis.

"Gaikindo supports the evaluation of automotive incentives in order to advance the national industry," Kukuh said in a media discussion entitled "Maintaining the Effectiveness of Automotive Incentives" at the Ministry of Industry building, Jakarta, quoted Tuesday, May 20.

According to him, the current component costs account for about 50 percent of the car price. Therefore, the provision of incentives to all types of automotive technology, both ICE, hybrid, BEV and LCGC is considered crucial to reduce prices and encourage demand.

Kukuh assessed that, with the right incentives, national car sales could reach an optimal figure of 3 million units per year, which is equivalent to the Mexican automotive market.

Currently, new car sales range from 1 million units per year, while used cars reach around 2 million units.

"This calculation is based on the average sales of used cars per year which reaches 2 million units. This means that if that number is diverted to a new car, sales can reach 3 million units," he said.

If this target is achieved, industry players will be encouraged to expand production capacity, either through factory expansion or the construction of new facilities.

The move is believed to absorb more labor and have a multiplier impact on the national economy.

"If the automotive (sector) adds one workforce, the effect is for two people. So, the lever effect is extraordinary. Automotive is a bridge to strengthen manufacturing. Do not let manufacturing wither before developing, because our market potential is very large," he said.

Gaikindo also encouraged the government to formulate a flexible long-term automotive policy and not fixated on just one technology.

According to Kukuh, hybrid cars, BEVs to conventional engine vehicles (ICE) and LCGC still have a strategic role in the transition to low-emission vehicles.

"For example, a hybrid car is currently on the rise in China. Technology continues to develop rapidly, so policies must be adaptive and provide broad benefits," he said.

He also emphasized the importance of making Indonesia a battery-based electric vehicle (BEV) production base for both domestic and export markets, in line with the production target of 600,000 BEV units by 2030.

Furthermore, Kukuh does not deny that high taxes are one of the main obstacles for people to buy new cars.

In Indonesia, the tax component can reach 50 percent of the car price, higher than Malaysia, which is only around 30 percent, even though GDP per capita is higher.

Therefore, Kukuh suggested that the government review the imposition of the Sales Tax on Luxury Goods (PPnBM), especially on cars at certain prices, which have actually become people's capital to make a living.

"Because this car is no longer a luxury item. For example, the types of cars (the price) are Rp. 300 or below Rp. 400 million, they have become part of his life, because they are used to earn a living," he said.

"So, it's time for us to evaluate whether it is still feasible to impose an added tax on the value of luxury goods for certain cars," he concluded.