Jakarta – Car sales in Indonesia have stagnated at around 1 million units annually, despite the influx of new vehicle brands into the market. According to data from the Association of Motor Vehicle Industries (Gaikindo), from 2013 to 2023, car sales in the country consistently hovered around the 1 million mark, except for 2020 and 2021 when the COVID-19 pandemic severely impacted sales.
Putu Juli Ardika, the Acting Director General of Information at the Ministry of Industry (Kemeperin), shed light on this issue during the “Discussion of Solutions to Overcome Car Market Stagnation” held at the Ministry of Industry Building on Wednesday, July 10, 2024. He highlighted several reasons behind the stagnation, including weakening purchasing power and rising vehicle prices due to inflation.
“One of the reasons why our sales have not increased is because people’s purchasing power is weakening. If we look at inflation, vehicles are becoming more expensive,” said Putu. He explained that in 2014, the gap between car prices and people’s income was around IDR 15 million, but by 2023, this gap had widened to IDR 30 million.
The rising cost of vehicles is not the only factor affecting car sales. The used car market has also seen significant growth, providing a more affordable alternative for many consumers. In 2014, there were 1.2 million new car purchases compared to 500,000 used car purchases. By 2023, while new car purchases were around 1 million, used car purchases surged to 1.4 million units.
Putu emphasized that to stimulate car sales, particularly new car sales, the government could consider providing fiscal incentives. One such measure is the Government-Borne Luxury Goods Sales Tax (PPnBM DTP). “How can this incentive be extended to low emission vehicles? The BEV (Battery Electric Vehicle) is almost the same as other countries, but for the others, it is still very far from other countries,” Putu noted.
The Impact of Inflation on Car Sales
Inflation has played a significant role in the stagnation of car sales in Indonesia. The increasing cost of vehicles, driven by inflation, has made it more challenging for consumers to afford new cars. As the gap between car prices and consumers’ incomes widens, many potential buyers are turning to the used car market as a more viable option.
Growth of the Used Car Market
The surge in the used car market indicates a shift in consumer preferences. Used cars offer a more affordable alternative, allowing consumers to bypass the high costs associated with new vehicles. This trend has been exacerbated by the economic impact of the COVID-19 pandemic, which strained many households’ finances.
The Role of Fiscal Incentives
To address the stagnation in car sales, the government is exploring various strategies, including fiscal incentives. One of the key proposals is to extend the Government-Borne Luxury Goods Sales Tax (PPnBM DTP) to low-emission vehicles. This move aims to make electric vehicles (EVs) and other low-emission vehicles more affordable, encouraging consumers to consider these environmentally friendly options.
Indonesia’s automotive industry is at a crucial juncture, with the potential to pivot towards more sustainable transportation solutions. By providing incentives for electric vehicles and other low-emission cars, the government hopes to not only boost car sales but also promote a greener automotive future.
The Future of Electric Vehicles in Indonesia
Electric vehicles (EVs) represent a promising solution to the stagnation in car sales. As the global automotive industry increasingly focuses on sustainability, Indonesia has the opportunity to align with this trend. By offering incentives and promoting the adoption of EVs, the country can drive growth in the automotive sector while contributing to environmental sustainability.