LCGC Incentives Are No Longer Relevant to Boost Car Sales

KatadataOTO – National car sales have still not shown optimal improvement throughout the first quarter of 2025.

In March 2025, the wholesale figure for four-wheeled vehicles, or distribution from factories to dealers, was recorded at 70,892 units.

Compared to February 2025, the figure dropped from the initial achievement of 72,336 units. Meanwhile, in the same period last year, in March 2024, wholesales managed to reach 74,720 units.

Several factors are considered to be the cause of the slowdown in national car sales figures. Thus, returning to the sales achievement of 1 million units in 2025 seems like it will still be difficult.

Photo : Toyota Astra Motor

Automotive observers believe the increase in VAT (Value Added Tax) is one of the factors.

It should be noted that VAT officially increased from 11 percent to 12 percent, effective February 1, 2025. This has forced many manufacturers to raise the selling prices of their vehicles.

LCGC (Low Cost Green Car), which are affordably priced vehicles, were also affected by the VAT increase. Some models even exceeded Rp 200 million.

“Let's not discuss the LCGC incentives anymore. If we want, let's talk about it comprehensively,” said Bebin Djuana, an automotive observer, when contacted by KatadataOTO recently.

The existence of other incentives, such as for electric and hybrid cars, is considered sufficient. As for vehicle types below them, there needs to be a VAT policy intervention so that their prices do not soar too high.

For example, according to Bebin, vehicles priced above Rp 1 billion should be subject to a 10 percent VAT. Meanwhile, those below Rp 1 billion could be lower, for example, six percent.

“So it doesn't differentiate between electric or non-electric (vehicles). I deliberately propose this so that fossil-fueled ones do not fall too far behind, and electric (vehicles) can accelerate,” he asserted.

He emphasized that various countries are currently aware of the economic turmoil. Therefore, their governments are stepping in to help from a regulatory standpoint.

Photo : Toyota

“Right now, it's the people who actually need (vehicles). Not for style, but because they require a means of transportation,” Bebin stressed.

With the economic situation still uncertain, Bebin reminded that there are other factors causing the weakening of purchasing power in the automotive sector.

Therefore, the government must step in directly to help improve the economic condition of the people. One way is by lowering the VAT percentage.