The Indonesian Automotive Industry Needs Stimulus, Not Just Incentives

KatadataOTO – Car sales in Indonesia are not doing well, despite exceeding Gaikindo's revised target for 2025 with retail sales of 833,692 units. The weakening purchasing power and the government's limited fiscal space currently make the sales forecast for 2026 unlikely to see significant movement.

The middle class, as potential buyers in the automotive industry, especially for cars, needs its purchasing power stimulated. Bob Azam, Vice President Director of PT Toyota Motor Manufacturing Indonesia (TMMIN), mentioned that he hopes the future government will be bold enough to adopt a counter-cyclical policy, which means providing stimulus when the economy slows down.

“We need a stimulus program, not just a one-time incentive or disposable consumption. And the one with the biggest leverage is the middle class. If they are given a stimulus, the impact will be widespread,” he said in Bandung some time ago.

Bob added that policies that are too populist and focused on the lower class are indeed popular right now, but they are not very effective in driving the economy.

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Meanwhile, if the middle class is given space, they will have a more strategic role because their consumption can drive the economy more broadly, from the manufacturing industry, financing, to the consumer supply chain.

“We can learn from other countries, Vietnam for example. To maintain domestic consumption, VAT was reduced from 10 percent to 8 percent. Malaysia also provides a stimulus for first-time vehicle buyers. This is more targeted because it can encourage car ownership without treating it as a luxury item,” Bob explained.

He added that if the economy is under pressure and the government instead raises taxes, that is not the right move. The opposite should be done, which is to continue boosting consumption, one way being through the middle class.

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In essence, when the economy slows down, the Indonesian government should provide a stimulus, not hold back or increase the fiscal burden. This step is necessary to maintain purchasing power and prevent a deeper industrial contraction.