Hendra Lie

Jakarta   ●  
Mon, February 21, 2022


Nothing lasts endlessly, not even a pandemic-induced downturn in Indonesia’s automotive market, as a number of data and activities have indicated that the sector is getting back again on its feet. Automakers have also pinned higher hopes on a stronger recovery this yr, many thanks to a variety of incentives which have been rolled out given that previous 12 months.

The Gaikindo Indonesia International Car Display (GIIAS) 2021 properly built its comeback late last calendar year, attracting hundreds of 1000’s of guests and selling thousands of cars during the 11-day party soon after cancelling its present in 2020 thanks to the raging COVID-19 outbreak.  

At the very same time, motor vehicle wholesales for 2021 have undoubtedly rebounded and exceeded 850,000 units a considerable boost in contrast to 2020’s product sales. The Affiliation of Indonesian

Automotive Makers (Gaikindo), predicted this year’s wholesales to attain 900,000 units, supported by a stronger economic restoration.

The nationwide auto wholesales plunged by additional than 51 percent year-on-12 months (yoy), to just around 532,000 units in 2020 and were far reduce than the average product sales of 1 million models sold in the very last four many years thanks to the pandemic. Auto product sales have been just one of the critical indicators of Indonesians’ getting ability.

The most current progress signals a promising restoration for the country’s automotive field, offering a breath of refreshing air and strong momentum for the really hard-hit sector. The federal government, central financial institution, and automakers concerted efforts are proving profitable to stimulate the marketplace to increase vehicle profits. 

Considering the fact that the extended COVID-19 pandemic strike the automotive sector tricky in 2020, the govt rolled out Luxury Profits Tax (LST) incentives for car buys in a bid to thrust the sector’s growth in 2021. The incentives are crucial for the reason that several taxes, this sort of as the LST and Benefit Extra Tax (VAT), account for close to 30 %-40 p.c of automobile prices in the state.

The LST slash up to December 2021 led to car price reductions of up to Rp 30 million (US$2,063) for preferred automobile designs, a reasonably major amount for Indonesian customers. The LST incentives allowed the market to absorb the industry’s overcapacity and enhance national vehicle income. Though the LST incentive has ended as of Dec. 31, 2021, there is however a solid expectation from automakers to lengthen the incentive timeline to proceed the gross sales rebound. In response to the expectation, under a modified scheme, the govt has prolonged the LST slash up to September 2022.

Even so, the incentive extension may well only be helpful in the short to medium term, as “the thrill” to use the incentive will fade as time goes by. 

In the Southeast Asia area, Indonesia is not the first to roll out the incentive for the automotive marketplace. Malaysia, for instance, commenced offering the similar incentive to the sector earlier. 

The government’s help of the automotive business is not constrained to the incentive but involves strengthening infrastructure for export and import pursuits. In December 2021 the govt officially commenced the use of the new Patimban seaport in Subang, West Java precisely for car export and import functions. This new transportation infrastructure is envisioned to support strengthen exports and lower logistic expenses, which will ultimately advantage vehicle exporters and importers. 

Lender Indonesia also lends a hand to help strengthen the automotive sector recovery, by enabling zero p.c down payments for new motor vehicle financial loans. The zero p.c down payment policy is pretty relevant to domestic vehicle product sales, as most Indonesian clients obtain vehicles with financing from banking companies or economic establishments.

The coverage took result in the course of the interval of March to December 2021 originally and carry on in 2022, as the central financial institution is committed to supporting the domestic economic climate growth. Coupled with the fact that third bash resources in Indonesian financial institutions soared in the earlier months, it is feasible that pent-up demand for autos will happen as COVID-19 circumstance quantities continue on to gradual in the foreseeable future. 

The PwC Shopper Insight Survey 2021 reveals that 6 out of 10 Indonesian consumers will commit a lot more in the following 6 months. Also, they are much more digitalized, and optimistic about the upcoming. 

All of these sorts of assist will be advantageous for the automakers, which ongoing to start new styles very last 12 months as part of their enterprise method to enhance product sales units, going forward. Some models have indicated their fascination to enter or re-enter the Indonesian sector this calendar year, implying their optimism about the Indonesian sector. This is easy to understand, as Indonesia has the major populace in the Southeast Asia location, making a big industry likely for automakers.  

Now, the ball is in the sector players’ area relating to how to put together by themselves for such a rebound in desire and likely fierce levels of competition. In our watch, adapting to the most recent engineering is a should for automakers to be in a position to compete and acquire consumers’ hearts although lowering creation prices. 

Digitalization in marketing and advertising and other operational capabilities will assistance enhance efficiency for the industry. Digital internet marketing efforts will help corporations to get to a larger audience with somewhat lower expenses in comparison to common marketing. Moreover, it is additional handy in the course of the pandemic circumstance, which demands actual physical distancing and restrictions general public gatherings.

Automotive industry players should pay out near interest to adjustments in the economic climate, consumers’ conduct, and technological know-how, in buy to trip the restoration momentum and attain the biggest benefit from the upward craze.


The author is the automotive market leader, PwC Indonesia.


By Tara