In Support of the Automotive Industry Ecosystem, Danamon, Adira Finance & MUFG Commit to Contribute to Indonesia's Economic Growth

Press Release / 04 April 2022

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Jakarta, 1 April 2022 – The Indonesian automotive industry is predicted to rebound this year, on the back of easing COVID-19 restrictions, recovering consumer purchasing power and the government's extension of fiscal incentives for the automotive industry until second quarter of 2022. This optimism was expressed by the Coordinating Minister for Economic Affairs Airlangga Hartarto as well as other speakers at the sharing session held by Danamon and Adira Finance, supported by MUFG and Dyandra Promosindo, at the Indonesia International Motor Show (IIMS) Hybrid 2022 yesterday at JIExpo Kemayoran, Jakarta. Danamon President Director Yasushi Itagaki, and Adira Finance President Director Dewa Made Susila* delivered opening remarks, while participating in the sharing session were PT Bank Danamon Indonesia Tbk* Deputy President Director Hafid Hadeli, MUFG Bank Ltd Global Corporate & Institutional Banking for Indonesia Head and Managing Director Pancaran Affendi, PT Bank Danamon Indonesia Tbk Enterprise Banking and Financial Institution (EB&FI) Director Thomas Sudarma*, and Dyandra Promosindo CEO Hendra Noor Saleh. 

During the event, Coordinating Minister for Economic Affairs Airlangga Hartarto stressed the Indonesian automotive industry’s role as one of the biggest contributors to the Indonesian economy. “The automotive industry's contribution reaches 20% of the non-oil and gas sector's revenue, which in turn contributes 18% to the country’s total GDP. Based on this percentage, the entire automotive industry contributes approximately Rp 700 trillion. In addition, the automotive industry absorbs 5 million workers, whether via direct or indirect employment.

In order to spur the national automotive industry’s growth this year, the government has extended fiscal incentives in the form of sales tax exemption on automotive luxury goods (PPnBM) for car purchases ranging from Rp 200 million to Rp 250 million, and a 100% discount on PPnBM government-borne tax for Low Cost Green Car (LCGC). This policy is based on encouraging sales data which recorded an uptick in the sales of four-wheeled vehicles in 2021 totalling 887,202 units, an increase of 66.7% compared to 532,027 units in 2020. This data is directly proportional to the absorption of PPnBM exemption which yielded a figure of 100% or Rp. 6.5 trillion in 2021.**

Aside from this government policy, the commitment of the private sector including financial institutions, serves as a key factor in shaping the automotive industry’s sustainable growth. The performance of multi-finance focuses on, and supported mainly by, consumer financing particularly in the automotive segment. This is parallel to the Indonesians’ high propensity for owning a private vehicle.

“Danamon, together with Adira Finance and supported by MUFG, would like to be known and recognized as the trusted banking partner of choice for the automotive industry and we believe we have a unique value proposition for this this industry. As a group, Danamon, Adira and MUFG collectively share a common aspiration for and belief in Indonesia’s potential for long-term economic and social growth. We recognize the national automotive industry as the main driver of sustainable economic growth, including facilitating a green economy through technology development,” said Yasushi Itagaki, President Director of PT Bank Danamon Indonesia Tbk.

The Indonesian automotive industry’s positive trend is inextricably linked with the government’s 2021 stimulus and incentive programs which will be extended until 2022. PT Adira Dinamika Multi Finance Tbk President Director Dewa Made Susila* states, "The government's stimulus and incentive program not only created a positive impact for consumers, but also for business players in the automotive industry.” Evident of this trend, growth in Adira Finance’s new car financing performance covering the months of January and February 2022 increased by 56.1% compared to the same period in the previous year. In addition, growth in new motorcycle financing performance during the first two months of 2022 increased by 16.2% year-on-year. "These trends strengthen our belief that Indonesia’s automotive industry will recover soon and we appreciate the government's efforts to provide various stimuli and incentives that encourage sales benefitting the country’s automotive industry," added Dewa Made Susila.

It is hoped that the government's policy coverage can also include the electric vehicle segment, which currently faces strong public demand. In his presentation, Airlangga Hartarto stated that Indonesia’s Green Economy roadmap, targeted to reach 25% in 2030, serves as both challenge and opportunity for the local automotive industry. "By that year, we expect to have 200,000 units of electric-based vehicles and Euro 4 emission standard vehicles. Therefore, harmonization of taxes (carbon tax) and carbon trading must be pursued," added Airlangga. 

In addition, Airlangga emphasized the government’s strong focus to build a sustainable automotive industry. During the discussion, Airlangga stated that Indonesia has the largest motorcycle market in Asia, with production volumes even exceeding those of the brands’ countries of origin. Indonesia has also proven its competitiveness by being able to export to 30 countries. Therefore, the government has been supporting the automotive industry with various policies such as a more detailed PPnBM policy that focuses on the development of both LCGC and non-LCGC vehicle technology, plus incentives for low-carbon vehicles, as well as complete production of electric and completely knocked down (CKD) cars. He hopes that this year’s IIMS Hybrid event can serve as a forum for all levels of society to participate in building a sustainable automotive industry.

In line with this expectation, IIMS Hybrid 2022 also encourages automotive industry stakeholders to participate in the clean energy transition program’s success to achieve net zero emission target by 2060. This runs parallel to the commitment of Danamon, Adira Finance and MUFG to support the Indonesian automotive industry’s transition to green technology and ensure access of this clean and environmentally friendly technology to everyone. Danamon, Adira Finance and MUFG also anticipate Japanese companies’ interest to invest in the Indonesian government's renewable energy program. The Group is ready to provide the necessary support to make this happen.

As the official bank and multi-finance partners respectively for the IIMS Hybrid 2022 event, Danamon and its subsidiary Adira Finance are supported by their holding company MUFG. This exemplifies their commitment, as 'bankers of the automotive industry', to encourage advancement of the Indonesian automotive industry and play an active role as the bank and financing institution that provide comprehensive solutions for both retail and industrial levels. "As an inclusive exhibition that integrates the entire ecosystem of the Indonesian automotive industry and contributes to government initiatives for national economic growth, we believe this event marks a milestone in reviving the automotive industry as well as Indonesia's economic recovery," added Yasushi Itagaki.

During the sharing session, Danamon announced various comprehensive financial solution innovations that were continuously implemented, as part of joint efforts by Danamon, Adira Finance and MUFG to play an active role in driving long term economic growth, especially for the country’s automotive industry. “We believe that an ecosystem’s success can only be achieved if every level in the financial supply chain has the same support system. As a group, Danamon, ADMF and MUFG can provide complete conventional and Sharia-based financial solutions. Danamon currently offers its distributor financing program to more than 150 distributors across the country and intends to further expand services covering lending, cash management, trade finance and treasury services. Danamon intends to become the transactional banking partner of choice for the entire automotive industry, from large manufacturers and dealers to retailers and consumers across Indonesia. In recognizing the entire automotive ecosystem, we also support the automotive aftermarket segment, including companies involved in workshops, spare parts and accessories by providing digital solutions, protection and business loans,” said Thomas Sudarma, Director of Enterprise Banking and Financial Institution (EB&FI) of PT Bank Danamon Indonesia Tbk. *

Hafid Hadeli, Deputy President Director of PT Bank Danamon Indonesia Tbk*, expressed his gratitude to the government for issuing the PPnBM policy that encourages vehicle sales, which experienced a slowdown due to the pandemic. “We are very enthusiastic about this policy because it supports the automotive retail sector, including Adira Finance which counts for 99% of its assets in the automotive sector. Danamon can finance automotive distributors and principals as well as retail customers through financing solutions that enable them to get their dream motorbike/car or savings/investment solutions for those who need to save first,” he explained.

Pancaran Affendi, Managing Director and Head of Global Corporate & Institutional Banking for Indonesia for MUFG Bank, Ltd adds, “Indonesia has a large automotive and target market. With the support of MUFG, Danamon and Adira Finance can support the domestic supply chain in the automotive industry to create and sustain efficiency and competitive advantage.” Being part of MUFG provides Danamon with the unique ability to access MUFG's global network and expertise so that it can serve customers throughout the supply chain. As for retail customers, Danamon through Adira Finance acts as a 'One Stop Service Solution' whose services and product convenience can be enjoyed by automotive enthusiasts at IIMS Hybrid 2022.

In his closing speech, Airlangga Hartarto also conveyed and welcomed the organization of the IIMS Hybrid 2022. “This event benefits the entire automotive industry ecosystem which the government views on a sectoral basis. There is a huge potential for our automotive industry. With a total installed factory capacity of 2 million units that still currently produces 1.1 million vehicle units, it can be maximized in terms of competitive and comparative advantages. Our work is not finished and there are still many challenges. Let's work together," he concluded.

*effective after passing the ‘Fit and Proper Test’ conducted by the Financial Services Authority

**Sources:

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