The performance of automotive industry in Indonesia has been accelerating despite the severe impact of Covid-19 pandemic. This is seen from the growth of the transportation equipment industry which reached 27.84% in the third quarter of 2021. This double-digit growth was recorded in the last three consecutive quarters. Sales figures from the automotive industry also boosted. Over January-September 2021, car retail sales reached 600,344 units or increased compared to the same period the previous year of 407,390 units.
Today, Indonesia’s automotive industry is supported by 21 companies of the four-wheeled motor vehicle manufacturing with a total investment value of Rp71.35 trillion. With total production capacity of 2.35 million units per year the industry absorbs a direct workforce of 38,000 workers, and more than 1.5 million people work along the value chain. Indonesia is the largest market of automotive products in ASEAN. This is an opportunity for the development and industrialization of motor vehicles, including energy-efficient and environmentally friendly in accordance with emerging global trends.
The Indonesian automotive industry has been widely recognized for its competitiveness in global market. Export markets of Indonesian four-wheeled motor vehicles and its components has reached more than 80 countries. In January-September 2021 Indonesia has exported 207,000 units of CBU vehicles with a value of Rp37.65 trillion, and 62,000 units of CKD valued at Rp0.96 trillion, and 65 million pieces of components worth Rp21.86 trillion.
In domestic market, the main supporting factor for the sales increase s is the relaxation of sales tax on luxury goods borne by the government (PPnBM DTP). This fiscal incentive has a significant impact on the recovery of automotive industry and increase the confidence of industry players. To date, PPnBM DTP program participants have empowered as many as 319 Tier 1 component industry companies and will help drive the improvement of the performance of the Tier 2 and 3 component industries, most of which belong to the category of small and medium-sized industries (SMEs).
Climate change requires all industry sectors including the automotive industry to adapt to environmental issues to reduce carbon emissions. Automotive industry globally contributes to the reduction of emission through developing a battery-based electric motor vehicle ecosystem (KBLBB). Indonesia has expressed its readiness to enter the era of electric vehicles contained through the adoption of Presidential Decree (Perpres) 55/2019 on Accelerating battery-based electric vehicle program for road transportation.
In order to implement Perpres 55/2019, the Ministry of Industry has issued two regulations. First, the Regulation of the Minister of Industry No. 27 of 2020 on Technical Specifications, Electric Vehicle Roadmap and Calculation of Domestic Local Content Level (TKDN) which serves as a guideline for automotive industry stakeholders related to strategy, policies, and programs in order to achieve Indonesia’s target as a production base and export hub of electric vehicles.
Second, Regulation of the Minister of Industry No. 28 of 2020 on Battery-Based Electric Motor Vehicles in a Complete Decomposed State and Incomplete Unraveling State as part of the development stage of KBLBB industrialization in Indonesia. According to this regulation, in the development of the KBLBB industrial ecosystem, by 2030, domestic industry is targeted to produce electric cars and electric buses as many as 600,000 units so that the figure can reduce fuel consumption by 3 million barrels and reduce CO2 emissions by 1.4 million tons. The effort is expected to support the fulfillment of the Indonesian government’s commitment on Greenhouse Gas (GHG) emissions by 29% in 2030.