Indonesia’s Automotive Sector Seeks Revival Through Tax Incentives Amid Slump
JAKARTA, investortrust.id – The Indonesian Ministry of Industry has proposed a range of tax incentives to counter a sharp 16.2% contraction in the automotive sector in 2024, aiming to revitalize growth and strengthen competitiveness.
Setia Diarta, the director general of metal, machinery, transportation equipment, and electronics industries at the ministry, announced plans to introduce a government-funded 3% luxury tax (PPnBM DTP) incentive for hybrid vehicles, including plug-in hybrids (PHEVs), full hybrids, and mild hybrids. Additionally, the ministry has proposed a 10% government-borne value-added tax (PPN DTP) for electric vehicles (EVs) to accelerate adoption and support the burgeoning EV market.
To further ease the burden on consumers, the ministy has recommended relaxing surcharges on motor vehicle taxes (PKB) and vehicle title transfer fees (BBNKB). “Currently, 25 provinces have issued regulations providing relief for PKB and BBNKB surcharges,” Setia said during a discussion titled "Prospects for the Automotive Industry in 2025 and Government Incentive Opportunities," on Tuesday, January 14, 2025.
The proposed measures come as the industry grapples with a combination of weakened consumer purchasing power and rising vehicle loan interest rates, alongside a broader 12% increase in value-added tax (PPN).
“These incentives are expected to provide tangible support for the national automotive industry’s sustainability and to ensure its competitiveness in both domestic and global markets,” Setia said, emphasizing the need for swift action to address the sector's challenges.
The ministry’s proposals reflect the government’s acknowledgment of the automotive sector’s pivotal role in Indonesia’s economy. The incentives, if implemented, are seen as critical steps toward restoring momentum and adapting to the global shift toward greener technologies.