President Joko Widodo asked industry ministry to examine an expanding and deepening luxurious tax for motorized vehicles with cylinder more than 1,500 cc and at least have local component at least 70 percent - Photo by Industry Ministry Office

JAKARTA (TheInsiderStories) – President Joko Widodo asked industry ministry to examine an expanding and deepening luxurious tax for motorized vehicles with cylinder more than 1,500 cc and at least have local component at least 70 percent, said the minister in an official statement released on Tuesday (03/16). Last month, the country has gave a relaxation to the automotive industry, in an effort to recover the economy.

The incentives will be given in stages starting March until the end of 2021. In the first stage, the government set the zero percent of value added tax (VAT), followed by 50 percent of rate in the second stage, and 25 percent in the third stage. The head of state has expressed his desire that four-wheeled motorized vehicles with a capacity of 2,500 cc will also get the tax incentives during this pandemic.

According to the minister of industry, Agus Gumiwang Kartasasmita, this expansion is created after getting a report the purchases order rate increased 140.8 percent until second week of this month. Based his office data, the auto production will increases to 81,752 units per month after the new policy running.

The additional output of the automotive industry are also estimated to be able to contribute to the state revenue around Rp1.62 trillion (US$112.50 million). He noted, the recovery in production and sales of the automotive industry will have a broad impact on other industrial sectors, because these sector is closely related to other supporting industries.

“We hope with the incentives, the consumption of middle-income people will increase and drives the economic growth in the first quarter of this year,” said the minister.

In 2020, Indonesian car sales dropped by 48.35 percent during 2020 depressed by the COVID-19 pandemic. According to the Association of Indonesian Automotive Producers (GAIKINDO), during of last year, the car-maker only sold 532,027 units from 2019 around 1.03 million units.

Based on the organization data, the worst auto sales occurred in April since the crisis in 1998, only sold 7,868 units or subsided by 90.63 percent compared to April 2019, which recorded 84,056 units. While, the highest sales happened in January, when sales touched 80,435 units in a month.

In detailed, passenger car sales such as sedans, 4X2, 4X4, still dominate with a percentage of 73.1 percent or 388,886 units. Then, the commercial vehicle sales increased 26.9 percent or 143,141 units. This year, the association hope the automotive market will recover than last year and could sell 750,000 units of car.

To boost the public purchasing power and national economic recovery, President Widodo’ administration has prepared Rp372.3 trillion of stimulus. And to help the weak of purchasing power and the consumer loans market, Bank Indonesia has decided to lower the down payment limit for motorcycles and unproductive three-wheeled vehicles from 10 percent to zero percent.

The three-wheeled vehicles or more that are productive also cut to zero percent from the original 5 percent and will take effect from Oct. 1, 2020. The governor, Perry Warjiyo, said the decision has been made to boost the public consumption and to accelerates the economic growth of the country. Based on the central bank data, the inflation remains low due to weak domestic demand.

US$1: Rp14,400

Written by Editorial Staff, Email: theinsiderstories@gmail.com