GIAMM: Incentives for Locally Produced Cars Can Help Prevent Layoffs

KatadataOTO – The automotive component industry is said to be facing various challenges, especially amidst the skyrocketing sales of electric cars receiving import incentives from the government.

It should be noted that the government provides subsidies for imported electric cars that meet the requirements, but manufacturers must have a commitment to local assembly by 2026.

As a result, manufacturers like BYD can sell imported electric cars but at a much lower price compared to similar models in their class and other competitors.

This has proven to boost domestic electric car sales figures. However, the negative impact is felt by the automotive component industry.

Photo : KatadataOTO

Additionally, there has been a weakening of purchasing power in the automotive sector, especially among lower-middle-class consumers with a preferred vehicle price range of around Rp 200 million.

Meanwhile, car sales in this segment, namely Low Cost Green Car (LCGC), could help with the absorption of local components.

The low absorption of components then led to layoffs (PHK) of many workers in assembly facilities or factories.

Seeing this, the Association of Indonesian Automotive Parts & Components Industries (GIAMM) revealed that there is a solution the government can implement to help the automotive component industry in the country.

“(GIAMM) hopes the government can provide incentives to create demand. Like during the Covid-19 era,” said Rachmat Basuki, Secretary General of GIAMM, when contacted by KatadataOTO recently.

Referring to information from the Coordinating Ministry for Economic Affairs of the Republic of Indonesia, the Luxury Goods Sales Tax Borne by the Government (PPnBM DTP) incentive has also been proven to increase sales.

Thanks to assistance from the government, there was a 113 percent increase in four-wheeled motor vehicle sales in the period from March to December 2021.

Furthermore, the vehicle lines included in the incentive program had a Local Content Level (TKDN) of 80 percent or more.

Thus, the absorption of domestic components could increase along with the rise in car sales, ultimately preventing layoffs.

“So the market grows, the component industry survives, and there are no employee reductions,” Rachmat emphasized.

Photo : KatadataOTO

It should be noted that the PPnBM DTP incentive, which was provided during the pandemic, applied to two car segments.

The first is LCGC or Low-Cost and Energy-Efficient Motor Vehicles (KBH2).

After that, new cars with engine capacities up to 1,500 cc, and an on-the-road price of Rp 200 million to Rp 250 million.