automotive

The Sale Of Automobiles May Decline To 500,000 Units By 2025 Due To The Impact Of A 12 Percent Value-added Tax

The General Secretary of the Indonesian Automotive Industry Association (Gaikindo), Kukuh Kumara, anticipates that the increase in the value-added tax (VAT) to 12 percent, along with additional tax options, could lead to a decline in car sales by as much as 500,000 units next year.

The VAT is set to rise from the current rate of 11 percent, as stipulated by Law Number 7 of 2021. This increase will affect automotive products starting January 1, 2025. The additional tax options, which are calculated based on a specific percentage, include three types as per Law Number 1 of 2022, two of which pertain to the automotive sector: the Motor Vehicle Tax (PKB) and the Motor Vehicle Transfer Fee (BBNKB).

These additional taxes will be collected by local government authorities and will take effect three years after the law was enacted on January 5, 2022, meaning they will be applicable from January 5, 2025.

"If these measures are implemented, we can expect a significant drop in sales. This year alone, we have revised our target from 1 million units to 850,000 units. With the additional taxes and a VAT of 12 percent, we could see sales plummet to levels similar to those during the pandemic, around 500,000 units," Kukuh stated on Monday, November 25.

Kukuh's projections are based on simulations conducted by Gaikindo in collaboration with economic experts. He also noted that a similar situation could arise in the motorcycle market.

According to Kukuh, the introduction of these two taxes is deemed inappropriate given the current decline in consumer purchasing power.

"If the increase exceeds 5 percent, the impact will be severe. This year, our sales target has already been revised from 1 million units to 850,000 units," he explained.

He further elaborated that since 2013, domestic sales of four-wheeled vehicles have remained around 1 million units annually, a figure that is considered ironic and indicative of stagnation.

"Since 2013, annual sales have hovered around 1 million units. This is quite ironic. One of the primary reasons for this stagnation is the decline in the middle-class demographic," he remarked.

Automobile sales in Indonesia peaked in 2013, reaching 1.22 million units, but have since declined through 2024. In 2019, sales remained stagnant at around 1 million units, but plummeted to 532,000 units in 2020 due to the devastating impact of the Covid-19 pandemic.

In 2021, there was a recovery in sales, which rose to 880,000 units, and then returned to 1 million units in both 2022 and 2023.Gaikindo forecasts that sales in 2024 will not reach 1 million units, leading to a revised projection of 850,000 units. In the first ten months of this year, automobile sales in Indonesia totaled only 710,000 units, reflecting a 15 percent decrease compared to the same period in 2023.

Tag: Automobiles Gaikindo Kukuh Kumara