The Reasons Behind New Car Prices Rising 7 Percent Annually

KatadataOTO – The public's purchasing power in the automotive sector is considered not to have fully recovered. There are many challenges faced by both the industry and consumers.

Furthermore, observers highlight that new car prices in Indonesia increase by seven percent annually.

This is evident from the price of Low Cost Green Cars (LCGC) which were previously sold for under IDR 100 million at their initial launch in 2013.

“In 2013, LCGCs started at around IDR 85 million. They increase by seven percent each year, that's the root of the problem,” said Yannes Martinus Pasaribu, an academic from the Bandung Institute of Technology (ITB) and an automotive observer, in Tangerang some time ago.

Photo : KatadataOTO

Additionally, the increase in car prices does not seem to be matched by an increase in public income. Thus, the purchasing power for tertiary needs has not increased.

“It was mentioned that prices in Malaysia are stable. But here, they increase by seven percent, this can be questioned (to the industry players),” said Yannes.

Responding to this, a representative from PT Suzuki Indomobil Sales (SIS) as a manufacturer revealed that there are reasons behind the annual increase in car prices.

“Actually, the increase is not what we want, meaning when we import, there is the effect of a fluctuating exchange rate. When the Rupiah weakens, our purchases become more expensive,” said Shodiq Wicaksono, Managing Director of PT SIS, on the same occasion.

He explained that some vehicle materials that are still imported are also affected by currency exchange rate instability.

However, upon closer examination, Shodiq emphasized that there are still many other factors causing car prices to increase by seven percent per year.

For example, the increase in Value Added Tax (VAT) to 12 percent, which will be implemented in 2025. This policy is said to cause new car prices to increase by IDR 2 million to IDR 4 million and above.

“The hope is perhaps from the improvement of economic conditions. Higher (public) income could eventually stimulate (car sales),” said Shodiq.

For your information, the Association of Indonesia Automotive Industries (Gaikindo) reportedly intends to revise its sales target due to conditions that have not improved by mid-2025.

Photo : KatadataOTO

“I will see in July (or) August whether we will make a revision or not. But it feels like there will probably be a revision,” said Yohannes Nangoi, Chairman of Gaikindo.

Previously, the initial target for wholesales (distribution from factory to dealer) of new cars was 850,000 vehicles, with a potential correction to 750,000 units.

There was a projection that an increase was still possible, with a maximum figure of 900,000 units.