The government maintains its positive outlook on the nation'€™s weakening automotive industry although car sales, an important indicator of domestic economic growth, have been battered by the weakest economic activity in six years.

Speaking during the opening of the Gaikindo International Indonesia Auto Show (GIIAS) '€” touted as Southeast Asia'€™s biggest automotive exhibition '€” on Thursday, Vice President Jusuf Kalla said he expected the event to brighten up the gloomy industry.

'€œThis exhibition is expected to be fruitful. We welcome this event as it reflects growth [in the industry],'€ Kalla said. '€œWe should manage domestic sales to avoid a drastic fall.'€

Earlier this week, the Association of Indonesian Automotive Manufacturers (Gaikindo) announced a 40 percent plunge in automotive sales in July this year from the same month last year, further deepening as sales have contracted from month to month throughout the year on weak demand.

Southeast Asia'€™s largest economy, which is primarily supported by domestic consumption, grew nearly 4.7 percent in the second quarter this year, its weakest since 2009.

Despite the sales slump, Kalla said automotive exports as well as the growth of the local components industry were improving.

He expected the local automotive industry would play a bigger role in Indonesia'€™s economy, as it had grown into a massive economic contributor, with thousands of dealers, vendors and subcontractors involved and a huge number of jobs created.

'€œVehicles have become a basic need globally, where many developed countries measure sales of cars and houses as their indicators and contributors of economic growth. Indonesia is heading toward that situation,'€ Kalla said.

Kalla'€™s special advisor for the economy, Sofjan Wanandi, said there was a possibility that the local automotive industry'€™s growth could rebound at the end of next year when domestic and global economies improved as the current weakening was only temporary.

'€œThe current situation is not permanent and we calculate that sales will improve in the next one or two years,'€ Sofjan said.

According to Sofjan, one of the factors that could positively affect the rebound would be higher economic growth of above 6 percent, as the government tries to boost infrastructure development, which could create a trickle-down effect for other industries, including automotive, resulting in positive growth for the middle-class population with stronger purchasing power.

As Indonesia already touched 1.2 million units of cars sales last year, Sofjan said the country had the potential to become the largest center of vehicle production in Asia, even though currently China holds the position and Thailand is the biggest competitor in the Southeast Asian region.

In order to help the domestic auto industry, Sofjan said the government was still mulling whether certain fiscal and industrial policies could be reviewed or improved, such as tax incentives, while also improving coordination between ministries and institutions as well as promoting harmony between various regulations.

'€œAll state institutions are still trying to work at the same speed and support each other, even though we know that industrial and tax policies are not synchronized in some aspects, because the Industry Ministry and Finance Ministry have slightly different objectives. The Tax Office wants higher taxes, but the Industry Ministry has a long-term vision that means more incentives are needed,'€ Sofjan said.

Gaikindo chairman Sudirman Maman Rusdi said the business group still saw people'€™s enthusiasm growing but overall, sales remained weak as it had already revised down its target from 1.1 million to 950,000 units this year.

'€œRight now in August, sales are getting weaker compared to the same month last year,'€ Sudirman said, adding that the business group did not set a specific sales target for the GIIAS this year.

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