Kemenperin Develops Strategy To Address Supply Chain Issues In The Automotive Industry

In the midst of an uncertain global situation, Indonesia's automotive industry continues to show remarkable growth. Both the two-wheeled and four-wheeled vehicle sectors are thriving, maintaining a robust supply chain.

From January to October 2024, the two-wheeled vehicle industry produced 5.8 million units and sold 5.4 million units, with 458 units exported. Similarly, the four-wheeled vehicle sector reported a production increase of 996,000 units, sales of 710,000 units, 390,000 units exported, and 80,000 units imported. "This represents a growth of 6.7 percent compared to the total for 2023," said Deputy Minister of Industry Faisol Riza during a panel discussion at Bloomberg Technoz Ecofest 2024 in Jakarta on Thursday, November 28.

To support global commitments to net zero emissions (NZE), Indonesia aims for a 43.2 percent reduction in emissions in line with international agreements. The government is preparing various incentives, including the removal of the Luxury Goods Tax (PPnBM), a 0 percent import duty, and Value Added Tax exemptions for electric vehicles.

"This regulation is designed to encourage investment and accelerate the transition to clean energy. In line with this commitment, the Ministry of Industry is adopting a multiple pathway approach as our strategy to achieve these targets," Faisol stated.

The Ministry of Industry has issued Regulation No. 36 of 2021 regarding Low Carbon Emission Four-Wheeled Vehicles, which provides tax reduction incentives for vehicles with low carbon emissions. This approach takes into account the strengths and weaknesses of each existing technology.

In the regulatory framework, there are requirements for using locally produced components from Indonesia or a minimum value of the Domestic Component Level (TKDN). If the local purchase and TKDN requirements are met, the automotive industry can receive incentives, both fiscal and non-fiscal.

"We have seen many local products that are actually produced in Indonesia. Although some components still come from abroad, the local component percentage is quite high, with some nearing 40 percent. Therefore, the Ministry of Industry continues to encourage these manufacturers to increase their local components," said the Deputy Minister of Industry.

To attract investment and speed up the development of the electric vehicle ecosystem, the Indonesian government has changed the TKDN target from a minimum of 40 percent by 2023 to a minimum of 40 percent until 2026, 60 percent until 2029, and 80 percent by 2030 and beyond.

According to Faisol, this change will help advance the domestic automotive industry, which significantly impacts the national economy. "We want all automotive producers to establish factories in Indonesia, as it has a high social and economic impact, including job creation," he stated.

The Deputy Minister of Industry emphasized that if large automotive factories in Indonesia, supported by small and medium industries, are not protected, it could lead to significant industrial issues due to the large number of workers involved and the extensive industry network.

Additionally, observing the market penetration of electric cars and motorcycles over the past two years, the Deputy Minister believes that the automotive market will be dominated by electric vehicles in about five years. "Therefore, we must start planning the transition from fossil fuel-based industries to electric or a combination of both."

Tag: Automotive Industry Kemenperin Net Zero Emissions