Motor vehicle sales in Indonesia’s automotive industry in the first half of 2024 again showed less than optimal results compared to the previous year.
The latest data uploaded by the Association of Indonesian Automotive Industries (Gaikindo) on their official website shows that wholesale sales in the first half of 2024 reached 408,012 units, a decrease of 19.5 percent from 506,427 units in 2023.
The same trend was seen in the retail segment, which only managed to record sales of 431,987 units, a decrease of 14 percent from the previous year’s 502,533 units.
Wholesale sales in June, according to Gaikindo’s report, only reached 72,936 units, down 11.8 percent compared to the previous year. For retail sales, Gaikindo recorded only 70,198 units, down 12.3 percent.
The decline in vehicle sales performance in Indonesia cannot yet be definitively attributed to a single cause. However, an analysis by the Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) indicates that the stagnation of the new car market is due to two factors: rising car prices and per capita income conditions.
“So, the findings are clear. First, per capita income hasn’t increased significantly, only three percent in the last 10 years, and car prices have risen above inflation, 5-6 percent. Our inflation is currently four percent,” said senior researcher from LPEM FEB UI, Riyanto.
He explained that car sales are closely related to economic factors such as car prices, credit interest rates, exchange rates, fuel prices, and car stock availability. However, the most significant factors affecting car sales are car prices and per capita income.
According to research conducted by LPEM FEB UI in collaboration with the Association of Indonesian Automotive Industries (Gaikindo), per capita income only increased by an average of 3.65 percent per year from 2013 to 2022. Car sales growth during that period declined by an average of 1.64 percent per year.
In comparison, from 2000 to 2013, per capita income increased by an average of 28.26 percent per year, and car sales increased by 21.23 percent per year.
The increase in used car sales, especially in Java, also affected the growth of new car sales.
In 2022, around 65 percent of car buyers in Java chose used cars, partly due to the widening price gap between new and used cars.
When new car prices rise and per capita income growth does not keep pace, used cars become an attractive option for those seeking affordable vehicles.
“The choice may be due to the fact that income isn’t rising significantly, new car prices are rising quite a bit, so the choice is used cars,” said Riyanto.
“Moreover, the used car market in the last 10 years has become more transparent. Now, defects are disclosed and warranties are provided. So it’s relatively transparent,” he added.
A short-term solution to address the stagnation in car sales, according to him, includes reducing the tax components on car prices.
The current tax component reaches 40 percent of the off-the-road car price. Reducing taxes could make car prices more affordable for consumers.
Additionally, the success of the luxury goods sales tax (PPnBM) relaxation in 2021 in boosting car sales is an example of how appropriate fiscal policies can stimulate market growth.
Riyanto also suggested the need for fiscal stimulus to enable the middle to upper-middle class to buy new cars, such as tax incentives for environmentally friendly vehicles (Low Cost Green Car/LCGC) and 4×2 low.
Furthermore, he recommended revitalizing the government’s affordable car program and encouraging production efficiency and discounts in car purchases.
“For producers, how efficient is the production? Is it possible to offer discounts? Exhibitions and discounts are programs to stimulate the market,” he said.
