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View all search resultsExtension of small car incentive ‘contradicts’ electrification push
Industry observers and experts say that, while the decision to extend the LCGC program to 2031 could help in the short term, the government needs to come up with a road map to secure the country’s electrification push for the long term.
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Newly assembled cars are parked on March 13, 2024, at a factory in Bojomangu, Bekasi regency, West Java. (Antara/Fakhri Hermansyah)
T
he Industry Ministry plans to extend the low-cost green car (LCGC) incentive program through 2031 to stimulate sales and boost car ownership, but experts warn the move could hinder the government’s vehicle electrification push.
“The LCGC program has proved to be successful in increasing vehicle ownership and supporting the national automotive industry. Therefore, we will continue the LCGC incentive through 2031,” Industry Minister Agus Gumiwang Kartasasmita said in a statement on July 12.
He had revealed the plan the day before during his visit to Expo 2025 Osaka, where he met with the principals of Japanese automotive giants Toyota, Suzuki and Daihatsu.
The ministry described the decision as part of efforts to keep vehicles affordable and support the country’s gradual transition to electric vehicles, though it did not explain how LCGCs, which rely on fuel as their primary energy source, aligned with the broader electrification plan.
Agus expressed hope that the incentive would bring long-term certainty for industry players as well as encourage greater domestic production and adoption of energy-efficient cars.
LCGCs are subject to a luxury goods sales tax (PPnBM) of just 3 percent. This is far below the rate for larger or luxury cars, which starts at 10 percent and can exceed 100 percent depending on engine size, emissions and body type.
The plan to extend the incentive raises questions about the government’s priorities vis-à-vis its declared goal of electrifying road transportation, given that it also offers tax breaks and subsidies for EVs and hybrid cars.
