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Car sales plunge. So what?

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Jakarta Post Editorial - January 16, 2025

Jakarta – Car sales have been plummeting in Indonesia lately, but maybe that is not all bad news.

Figures presented by the Indonesian Automotive Manufacturers Association (Gaikindo) earlier this week show that 14 percent fewer new cars were sold from factories to dealers in 2024 than in 2023, and 2023 had already marked a decline from 2022.

Over the past two years, the number of vehicles sold dropped from around 1.05 million to 865,723.

The data suggests that Indonesians are either going cold on car ownership or simply that fewer people can afford a new ride.

Producers, always keen to obtain or maintain government incentives, have blamed supposedly weakening consumer spending power for the decline.

They have also lowered the bar for this year by abandoning their usual 1-million sales target in favor of a more moderate 900,000 units.

One cannot fault manufacturers and distributors for pushing for new stimulus measures to prop up car demand, even though the government has rolled out a host of policies already to reduce taxes and fees.

But affordability could be just one of several reasons for flagging car sales. Potential buyers might simply be holding off on buying a new car at this time because they are unsure about whether to go for a conventional engine or a battery-powered or hybrid car instead.

Even some who have made up their mind to buy an electric vehicle might be waiting for new models to become available in the country or for more public charging stations to be set up.

The Gaikindo figures do not shed light on any such considerations, but they do show that EVs and hybrid cars have been going like hot cakes, as sales of these vehicle types more than doubled last year and now account for a combined 12 percent of the overall car market.

No sign of weak consumer spending power there.

Of course, the automotive industry is an important part of Indonesia's economy, accounting for 4.5 percent of gross domestic product, according to the Industry Ministry.

Carmakers and adjacent industries also bring in export revenue and provide employment in the pivotal manufacturing sector, thereby making our economy less dependent on commodities with volatile global prices.

That said, lower sales within the country do not say anything about shipments to other countries.

More importantly, the Gaikindo data does not indicate any problems in the EV segment, which is central to Indonesia's downstream development agenda as the government strives to expand the auto industry around the production of batteries, from the mining of nickel to the recycling of materials.

As long as that crucial market segment is seeing strong demand growth, Indonesia can continue to leverage its large consumer market as a pull factor for investment. With new factories planned to produce cheaper EVs inside the country, that trend looks sustainable even if affordability issues are currently a concern.

Hence, there is no need to fret too much over the drop in car sales. This might, in fact, be a good time to think about how to improve public transportation to make private car ownership a matter of desire rather than necessity, at least in the country's urban centers.

In Jakarta, efforts to integrate different modes of public transportation have not moved much beyond unified payments.

Long waits for packed buses and hazardous walks on roads full of wayward motorcyclists, or on sidewalks riddled with holes and blocked by food stalls, just to arrive at the office dirty, sweaty and an hour late, will not convince anybody to ditch their beloved automobile.

Public transportation is just not good enough.

Central and regional government authorities must redouble their efforts to provide a viable alternative to private transportation. Doing so will require not only a financial commitment but also a readiness for unpopular decisions, for instance when people need to be resettled to make space for new infrastructure.

EVs are the future, but so are cities with smooth public transportation.

Source: https://www.thejakartapost.com/opinion/2025/01/16/car-sales-plunge-so-what.htm

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