Gaikindo: National Car Sales May Down To Pandemic Level Of Around 500,000 Next Year

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Gaikindo: National Car Sales May Down To Pandemic Level Of Around 500,000 Next Year

Thursday, 28 Nov 2024

The Indonesian Automotive Industry Association (Gaikindo) has indicated that domestic car sales next year may revert to levels seen during the Covid-19 pandemic, approximately 500,000 units. Gaikindo's Secretary General, Kukuh Kumara, explained that this situation could arise with the implementation of a 12 percent Value Added Tax (VAT) and additional tax options, including the Motor Vehicle Tax (PKB) and the Motor Vehicle Transfer Fee (BBNKB).

"If this policy is enacted, the decline will be significant. This year, the sales target has already been revised from 1 million units to 850,000 units. With the added tax options and the 12 percent VAT, sales could drop to pandemic levels, around 500,000 units," Kukuh stated recently.

He further noted that simulations indicate that each 1 percent increase in tax options could lead to a 10 percent reduction in vehicle sales. This presents a considerable challenge, particularly amid weakening consumer purchasing power. Additionally, Kukuh highlighted the phenomenon of a declining middle class, with approximately 10 million individuals falling out of this segment, which also contributes to the weakening demand for vehicles. "The middle class is the primary driver of car sales. When their purchasing power diminishes, the impact is substantial," he remarked.

In a separate occasion, Gaikindo Chairman Jongkie Sugiarto mentioned that the effects of the 12 percent VAT increase will be felt more acutely by consumers of lower-priced vehicles, as a car priced at Rp 300 million would see an increase of around Rp 3 million.

Gaikindo emphasizes the necessity for government support in the automotive industry, particularly through fiscal incentives such as the exemption of the luxury goods tax (PPnBM), which has proven effective during the pandemic recovery period. In contrast, Malaysia has successfully maintained automotive market growth through robust incentive policies, even surpassing Thailand in vehicle sales. The economic situation in Indonesia, which has grown at a rate of just over 5 percent, falling short of the initial projection of 6 percent, exacerbates the challenges faced.

"If strategic measures are not implemented, Indonesia's position in the ASEAN automotive market may be jeopardized, while other countries like Malaysia continue to experience significant growth," stated Kukuh. (ferry@insightinnews.com)

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