No Automotive Incentives In 2026 Can Make Investors Leave And Many Layoffs

Booth Toyota at GJAW 2025. (Photo: VOI)

JAKARTA - The condition of the new car market in Indonesia throughout 2025 is quite upset, this encourages the Ministry of Industry (Kemenperin), proposing providing incentives for the 2026 period. However, on the other hand, Coordinating Minister for Economic Affairs (Menko Perekonomian) Airlangga Hartarto, emphasized that under next year there is no need for incentives for the automotive industry.

The Ministry of Industry emphasized that the national automotive industry is in need of real intervention in the form of incentives to strengthen the ecosystem from upstream to downstream. This is to maintain production utilization, protect investment, withstand potential layoffs, as well as increase the competitiveness of domestic products in the midst of changes in market dynamics.

The Ministry of Industry noted that sales of electric vehicles (EVs) did increase significantly in the period October - January 2025. However, this spike was mostly contributed by imported models.

Of the total sales of 69,146 units of electric vehicles in 2025, around 73 percent are imported EVs whose added value and employment actually occur in other countries. On the other hand, the segment of conventional vehicles produced domestically, and so far, the market pillar continues to decline sharply.

"So, it is wrong if we state that the automotive industry is in strong condition by only relying on vehicle growth indicators in certain segments. The sharp decline in sales of four-wheeled motorized vehicles is far below the production figure when sales of imported EV vehicles rise sharply is an unavoidable fact," said Ministry of Industry spokesman Febri Hendri Antoni Arief, in his official statement, quoted Tuesday, December 2.

"And, it should be an indicator of the growth of the national automotive industry at this time. We view that incentives are needed to reverse the situation," he continued.

Febri also dismissed the notion that the rise of automotive exhibitions is proof of industrial power. According to him, many exhibitions actually show the hard efforts of industry players to maintain demand amid the decline in the market.

The large number of automotive exhibitions in various places in Indonesia is also not a medium size for the automotive industry. On the other hand, many automotive exhibitions are efforts and industrial struggles to maintain demand amid falling domestic sales and at the same time protecting workers from layoffs," he explained.

Gaikindo noted that sales of wholesales in January 2025 only reached 634,844 units, down 10.6 percent compared to the same period last year. According to Febri, these conditions pose a risk of suppressing factory utilization, disrupting investment flows, and threatening job sustainability.

"The absence of policy intervention will make this pressure deepen, and the effect can affect the industrial structure as a whole," he said.

The encouragement for the government to immediately provide incentives also came from the automotive community. The founder of Xpander Mitsubishi Owners Club (X-MOC) Sonny Eka Putra, assessed that incentives should be adjusted to the needs of each segment.

If I look at the case by case. This actually also applies to electric cars. It means that incentives are needed for cars of the lower middle class so that they are right on target. If the one in the upper segment is not obligatory, "he said.

"In fact, hybrid cars are usually more expensive. Only yesterday did Veloz leave, the price was below Rp. 300 million. But what is certain is that the middle and upper class cars should not have incentives, because they think they (consumers) are able to buy," he added.

The Ministry of Industry emphasized that future incentives will be directed to the lower and lower class segment and based on the TKDN value. This policy is expected to restore purchasing power, improve the industrial climate, as well as maintain the sustainability of the workforce in the national automotive sector.