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Car sales dip 7% in April despite expanded tax cut
In March, car sales surged 70 percent from the previous month to 84,915 units after the government implemented the first tax cut for cars with engine capacities under 1,500 cc.
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omestic car sales dipped in April but still hovered above industry expectations as negative first-quarter household spending countered a car tax incentive introduced that month.
Sales dipped 7 percent month-on-month (mtm) to 78,908 vehicles in April, a figure above the industry’s expected 70,000 units, after the Finance Ministry introduced a luxury tax (PPnBM) cut for cars with engine capacities between 1,500 cc and 2,500 cc, according to Indonesian Car Producers Association (Gaikindo) data.
However, the April sales figure also marks a 903 percent growth from the same month last year, a huge improvement compared to sales during the peak COVID-19 year.
“Based on the year-on-year sales trend, what is happening is still growth. However, this is just a deceleration of the growth,” Center of Reform on Economics (CORE) Indonesia research director Piter Abdullah said in an interview on Wednesday.
“In March, we may have seen the peak effects of the PPnBM tax cuts as the policy had just been implemented. So, we might need to wait for the overall trend in the months ahead.”
In March, car sales surged 70 percent mtm to 84,915 units after the government implemented the first PPnBM tax cut for cars with engine capacities under 1,500 cc.
The low car sales were recorded in the same quarter as when Indonesia’s household spending contracted 2.23 percent year-on-year, Statistics Indonesia (BPS) data shows, which countered the luxury tax cut meant to spur spending and revive the domestic automobile industry.
April also saw Indonesia’s consumer confidence index hit 101.5, a marked improvement from 93.4 in the previous month, because any figure above 100 indicates consumer optimism, whereas a figure below 100 indicates pessimism.
The Finance Ministry introduced a 100 percent PPnBM tax cut for cars under 1,500 cc for March to May and a 50 percent PPnBM tax cut for cars between 1,500cc and 2,500cc for the months of April to August.
Gaikindo recorded the biggest drop in wholesales in 4x4 cars with engine capacities under 1,500cc, at 92 percent mtm to one unit in April. The second-biggest drop was recorded in 4x2 cars with similar engine capacities at 20 percent mtm to 31,113 units. Only wholesales of 4x2 cars with capacities of up to 2,500 cc rose at 81 percent mtm to 10,906 units in the same month.
Gaikindo commission I chair Jongkie D Sugiarto said in an interview on Thursday that the monthly dip in sales was within the normal range and that sales volumes would remain high until May or until the tax cut ends.
“We are still optimistic that we can keep the current sales numbers in the months ahead,” he said.
The association expects average monthly sales of between 60,000 and 70,000 cars this year, which is higher than the 2020 monthly average of 50,000 cars sold but lower than the 85,000 to 90,000 cars sold monthly in 2019, or before Indonesia’s coronavirus outbreak emerged.
