Automotive - Tax option delayed, national car sales projected to accelerate

Automotive - Tax option delayed, national car sales projected to accelerate Good news is coming to the national automotive industry. The reason is that several provinces have decided to postpone the implementation of the optional tax policy for motor vehicles until 2025. Director of Maritime, Transportation Equipment, and Defense Industry (IMATAP) at the Ministry of Industry (Kemenperin), Dodiet Prasetyo, appreciates the 25 regional heads who have provided discounts or postponed the implementation of motor vehicle tax policies in their respective areas. This decision is expected to rekindle public enthusiasm for purchasing new cars in 2025. The tax option policy is mandated by Law No. 1 of 2022 concerning the Financial Relations between the Central Government and Regional Governments (HKPD). The tax option for both motor vehicle tax (PKB) and motor vehicle transfer tax (BBNKB) is imposed by the Regency/City Government at 66% of the PKB and BBNKB received by the Provincial Government. Gaikindo has set a target for national car sales of 900,000 units by 2025. This projection is higher than the realization of national car sales last year, which was 865,723 units for the wholesales category (factory to dealer) and 889,680 units for the retail category (dealer to consumer). (Source : Kontan) Comment : We believe that softer consumer spending was the primary driver of the decline in car sales in 2024. We anticipate that 2025 car sales may not fully recover to 2023 levels, with the potential implementation of the 'opsen' tax posing an additional headwind for the industry. While the cancellation of the 'opsen' tax would provide some relief, it may not significantly boost car sales due to lingering consumer uncertainty and a cautious approach. Therefore, we believe the industry will likely prioritize postponing the implementation of the 'opsen' tax. We forecast 2025 domestic 4-wheel vehicle sales to reach 903,557 units, driven by a low base effect. This forecast aligns with our expectation of 886,256 units for 2024, which was achieved with a run-rate of approximately 98%. We maintain our Overweight stance on the sector, with ASII as our preferred pick.