Vincent Fabian Thomas (The Jakarta Post)
Sun 17 October 2021
A new luxury emission-based tax (PPnBM) on cars went into effect on Saturday, which aims to boost demand for low-emission cars, but automakers say the tax does little to resolve the price gap between ordinary cars and environmentally friendly cars, including electric ones. cars.
Government Regulation (PP) No 73/2019, which entered into force two years after its publication, imposes higher luxury tax rates on cars with higher engine displacement and higher carbon dioxide (CO2) emissions , measured in grams of CO2 per kilometer (g / km).
It modifies the previous regulation of 2013 which charged PPnBM tariffs according to the displacement, the number of passengers and the types of vehicles: sedan or not.
The new regulation imposes a PPnBM rate of 0% for electric vehicles (EVs) and 2 to 12% for hybrid cars, it increases the rate from 0 to 3% for low-cost green cars (LCGC) – the fossil-fueled vehicles despite their name – and sets a rate of 15 to 40 percent for regular fossil-fueled cars.
“This new emission-based luxury tax is a government effort to encourage the production of more environmentally friendly vehicles with low emissions,” said Febri Hendri, spokesperson for the Ministry of Industry. Jakarta Post October 13.
The government has big plans to encourage the adoption of electric vehicles (EVs) in Indonesia to cut oil imports, reduce air pollution and attract foreign investment, but adoption rates remain low at – last month – 0.04% of the 400,000 electric cars by 2025 target.
Read also: Indonesia “still far” from the goal of adopting electric vehicles: a ministry official
The Ministry of Investment also recently gained interest from German automaker Volkswagen and chemicals maker BASF to invest in Indonesia’s electric vehicle battery supply chain, after South Koreans Hyundai and LG started construction of an electric vehicle battery factory last year.
Enough to push the EV transition?
Indonesian Automobile Industry Association (GAIKINDO) General Secretary Kukuh Kumara told the To post on Oct. 11, that new luxury tax rules would push manufacturers to produce low-emission cars in order to keep prices affordable for the market.
However, the effect of the new regulation on the adoption of electric vehicles is expected to be minimal, as most electric vehicles would remain expensive despite the reduction in PPnBM, he said.
âSome electric vehicles still cost over a billion rupees and are only a small part of the market. It will still take time, unless there are affordable electric cars, âKukuh said.
Electric cars cost about three times as much as their fossil-fueled counterparts, according to a study by the Institute for Essential Services Reform (IESR) in Jakarta.
Bob Azam, director of government technical affairs at Toyota Motor Manufacturing Indonesia (TMMI), Indonesia’s largest automaker, told the To post on Oct. 12, that electric vehicle technology was still new, which meant buyers had to pay hefty prices to own electric vehicles.
Additionally, the limited availability of charging stations in Indonesia, among many other infrastructure issues, has hampered the adoption of EVs.
Low and middle income consumers
Bob of TMMI has suggested that the government encourage the purchase of hybrid cars and flexible fuel cars – those that can run on high-level biofuel blends – as a transitional technology for electric vehicles. These cars are more affordable than electric vehicles, but have lower emissions than regular cars.
“If the price [of regular cars] increases, there should be a solution [for low-middle income homes] based on more affordable technologies. Don’t penalize them, but rather encourage them, âhe said.
Government regulation 74/2021, which modifies certain clauses of the PP 2019, increased the rates of the luxury tax on hybrid vehicles to encourage the adoption of electric vehicles.
The new regulation increases the PPnBM rate for plug-in hybrids from 0 to 5%, and for full hybrid vehicles with emissions below 100 g of CO2 g / km by 2 to 6%.
Read also: Manufacture of car batteries
Andry Satrio Nugroho, who heads the Center for Industry, Trade and Investment at the Institute for the Development of Economy and Finance (Indef), said the new regulations carried risks associated with the disruption of daily and business activities, as most Indonesians, especially low- and middle-income Indonesians, relied on vehicles running on fossil fuels.
âEncouraging the public to buy more sustainable products is a good thing, but we should not overlook its potential impact on a [demographic] group, âAndry told To post October 12.
Industry Ministry spokesman Febri said the government had limited the hike in luxury tax rates for LCGCs precisely to protect low and middle income groups.
âAs for the lower end average consumers, the government has paid attention to them by giving a low luxury tax rate for LCGCs of just 3%,â he said.