Green Car Incentive Spurs Parts Industry Booming

Jumat, 07 Juni 2013 | 09:51

The investment in automotive component industry is believed to increase after President Susilo Bambang Yudhoyono signed the Government Regulation on low cost green car (LCGC).Director General of High Technology-based Industry Budi Darmadi said the Government Regulation No. 41/2013 on Taxable Goods Categorized as Luxury Goods in Form of Motor Vehicles Subject to Sales Tax on Luxury Goods is a legal manifestation of consent signed by the President on May 23.

According to him, the regulation is a large investment mission which encourages the involvement of many foreign automotive investors to move to Indonesia. It will stimulate vehicle component industry ranging from small parts to large components.  “For example, car has more than 10,000-12,000 component parts. Therefore, it will encourage the entry of component investors for vehicle that is produced in accordance to the LCGC regulation,” he said on Thursday (6/6).

If the new regulation is implemented, the government predicted that there will be new investment of US$6.5 billion in the next few years, in which US$3 billion for plants and US$3.5 billion for 100 component companies supporting low cost car.

He said that every car manufacturer who wants to produce cheap and eco-friendly cars (LCGC) will get incentives if they involve car components from outside its car manufacturer. According to Budi, demand for low cost car will reach high level in the next few years. Therefore, the government wants car producers to work with local and foreign car component manufacturers. “This will attract foreign producers of small and large components to invest in Indonesia,” he said.

Since last year, Budi added, more than 30 component companies came to Indonesia for investment. The number is estimated to increase up to 50 companies in 2013 and to increase again in 2014. The LCGC regulation in Indonesia covers the use of 1,000-2,000 cc engine, fuel consumption of 22km/liter for 1,000 cc engine, use of unsubsidized pertamax fuel or 92 octane fuel, and sold at price of IDR100 million (on the road).

Moreover, the component in the first year must be at least 40% from the total used components, 60% in the third year, and 80% in the fifth year. LCGC products below 1,000 cc are free from sales tax on luxury goods (PPNBM), while LCGC cars with engine above 1,000 cc are subject to 10% PPnBM.

Jhonny Darmawan, PT Toyota Astra Motor President Director and the Third Chairman of Indonesia Automotive Industries Association, has positively welcomed this new regulation. However, the regulation’s derivative hasn’t been elaborated clearly so that further step can’t be taken.

According to him, the three-year waiting for this LCGC regulation could bring a fresh breeze but the government through the Ministry of Finance and Ministry of Industry must immediately elaborate the derivative in details. “It should be accelerated in order to be sold into the market soon,” he said.

Minister of Industry MS Hidayat stated that the sole agents are now able to market eco-friendly vehicle under this new regulation since it has been officially signed by President Susilo Bambang Yudhoyono. The regulation on low carbon emission will be the legal basis of government program to encourage production and use of LCGC in Indonesia. As for the program, it includes incentives and requirements for cars that will be categorized as low cost green car, hybrid-powered car, electric car, and biofuel car.

According to Hidayat, the regulation issuance is in line with the government’s plan to increase the price of subsidized fuel. “This is in line between efficiency of subsidized fuel with the use of alternative energy,” he said. In addition, Hidayat added, President SBY also plans to hold an event as a symbol that will be attended by all manufacturers/sole agents who want this program to succeed. “It will be held soon. If necessary, the President will buy a low cost car as a symbol.”

Following the issuance of the new regulation, several foreign manufacturers are planning to invest in low cost car manufacturing in Indonesia. “VW and Peugeot manufactures are interested to invest,” he said. Director General of High Technology-based Industry Budi Darmadi added that the new regulation issuance has opened the way for sole agents to market their products. “It usually takes three month to put into effect, but this regulation has come into force on May 23, 2013.” (T06/aph/tw)

by  Emanuel Tome Hayon, Riendy Astria, Arsyad Paripurna