Gov’t Grants Tax Incentive to Support Automotive Industry

Oleh Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation
Dipublikasikan pada 30 Maret 2021
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President Joko Widodo virtually inaugurating the launching of exports to the global market in 2020. (Photo: Bureau of Press, Media, and Information of Presidential Secretariat)

The Government continues to increase public consumption that has dropped amid the pandemic.

To maintain the automotive industry and increase demands of motorized vehicles, the Government has announced it is stimulating consumption by granting tax incentive for motorized vehicles.

According to Chairperson of the Association of Indonesia Automotive Industry (GAIKINDO) Yohannes Nangoi, Indonesia is self-sufficient in car production, adding that 90 percent of domestic demands are supplied by domestic factories and 70-80 percent has used local raw materials.

In fact, he went on to say that Indonesia is able to export 330,000 cars to many countries, including Japan.

“If you go abroad and see cars such as Xpander, Isuzu Traga, or vehicles with the same type as Daihatsu GranMax, all of them are from Indonesia because the factories are only in Indonesia,” he said, quoted from the website of Ministry of Finance.

Nangoi added that the factories can produce 2.4 million vehicles per year and car sales usually reach 1.5 million per year, 1.2 million for domestic demands and 330,000 for export. However, due to the pandemic, he added, the total of sales in 2020 dropped to approximately 700,000 cars, 530,000 for domestic demands and around 200,000 for export.

If the sales continue to decrease in 2021, he said, there can be massive layoffs and the operation of automotive business sector is threatened.

The State Budget is allocated to different areas, including to increase public consumption and support the business sector.

Minister of Finance Sri Mulyani Indrawati stated that the budget for luxury goods tax incentive is projected to reach Rp2.99 trillion, adding that the Government hopes the incentive is used by the public, so it can boost the automotive industry and national economic growth.

“We intentionally designed it as front-loading. The purpose is to enhance confidence and simultaneously boost economic recovery,” she remarked.

For the record, the automotive industry in 2019 contributed 3.98 percent to non-oil and gas Gross Domestic Product. This labor-intensive sector has a huge manpower, namely 1.5 million direct workers and 4.5 million indirect workers. The supply chain of this sector is also extensive as there are approximately 7,451 factories that produce input products for the automotive industry. (PR of Ministry of Finance/UN) (DH/EP)

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