- 19/06/2017
- Category: Commentaries
The LCGC (Low Cost Green Car) program was established by the Indonesian government in 2013, to be implemented until 2018.[i] The program deemed to be able to reduce carbon emission and reduce fossil fuel consumption of the country. But what’s the reality?
Initially, the LCGC program was aimed to support Indonesia’s ambitious sustainable development project on green transportation, namely the Low Emission Carbon Project (LECP). The LECP was first introduced in the G+20 Conference in Rio de Janeiro, on June 2012. LCGC policy in Indonesia was formally executed by the implementation of specific regulations on tax deduction on luxury goods, especially for low emission cars (PP/41/13, 2013). This policy mainly aimed at increasing low emission cars’ market share and thus, achieving zero carbon emission of national transportation armadas. In addition to achieving lower carbon emission, this program also tries to reduce fossil fuel consumption in the transportation sector and subsequently to reduce government spending on energy subsidies.
Indonesia’s car manufacturers have been implementing LCGC Program by producing several LCGC car products such as Daihatsu Ayla, Toyota Agya, Honda Brio, and Datsun Go. LCGC policy imposed several specific criteria to regulate LCGC car production. Firstly, it must have low prices. The selling prices must be at Rp 50 million for rural citizens and Rp 85 million for urban citizens. Secondly, LCGC car must have efficient fuel consumption rate at 20 km/liter. Thirdly, this regulation requires LCGC manufacturers to use at least 60% of domestic components.
One criticism of the LCG cars is that it only reduces the emissions the cars emit, but, unlike the hybrid or electric cars, it does not stop the emissions altogether. The fact that the LCGCs sales have been increased significantly in recent years shows the first failure of this program. Gaikindo’s study shows that LCGC cars’ sales have been increasing for about 142% in 2016, a number that is even much higher compared to the increasing sales of general cars which were only 110%.[ii] It can be analyzed from the data that the low prices of LCGC cars which was initially targeting lower class society have been significantly contributing to the increasing number of car volume on the roads. Lower or middle-class society who could not afford to buy a car in the past, have now been encouraged to buy LCGC cars. This has then contributed to the increasing number of pollution and carbon emission as well. Moreover, fossil fuel consumption has also increased, and the initial purpose behind producing LCGC cars could not be achieved.
Furthermore, LCGC cars’ prices ironically had been rising, and LCGC has been notably known as “Expensive Cheap Car.” Today, it’s quite rare to find LCGC cars with the price below 100 million rupiahs, as LCGC cars practically compete with the non-LCGC cars.[iii] LCGC cars manufacturers use Industrial Ministry Regulation (Permenperin No.33/MIND/PER/7/2013) on the development of Energy Saving and Cheap Price Vehicle as a legal instrument to increase the market prices of their LCGC cars. In that regulation, the government has allowed car manufacturers to adjust the selling price, but there are no maximum limits of LCGC market prices.
LCGC Regulation was an embodiment of government commitment to implement sustainable development policy, without sacrificing its dependency on the automotive industry as one of the most important factors that contributed significantly to Indonesia economic growth. In this regard, LCGCs program could be perceived as a compromise policy. Sustainable Development policy is an inevitability, due to several ecologies and environmental necessity that require the government to change its policy into pro-environment policy. On the other side, the government was also dependent on automotive industry, as it contributes significantly to our national economy. In 2016 alone, automotive industry has contributed up to 10.47% of Indonesia’s Gross Domestic Product (GDP).[iv] Hence, LCGC policy was initially developed as a government effort to synchronize the goal of sustainable development with the reality of our economy dependency to the automotive industry.
Although the LCGCs is an interesting program, the implementation should be a subject for evaluation regarding its stated goal of reducing carbon gas emission. Even as an instrument to reduce fossil fuel consumption, this policy could probably have failed, because the numbers of vehicles have been ironically rising. Responding to this problem, the government should begin to develop an environmentally-friendly policy which supports actions to convert fossil fuel energy into an environmentally friendly energy. In this regard, hybrid or electric vehicles could be one compelling alternative to consider.
picture: pexels.com
[i] Kementrian Republik Indonesia. (2014). Automotive Industry Development Policy. [online]. Available at: http://transportandclimatechange.org/wp-content/uploads/sites/1423/2014/11/Automotive-Industry-Development-Policy.pdf [Accessed 14th May 2017]
[ii] Website Resmi Pemerintah Provinsi Jawa Barat. (2017). Penjualan Mobil LCGC Tahun 2016 Naik. [online] Jabarprov.go. Available at: http://www.jabarprov.go.id/index.php/news/21435/2017/02/20/Penjualan-Mobil-LCGC-Tahun-2016-Naik [Accessed 14th May 2017]
[iii] Gaikindo. (2016). Opsi dan Fitur Ikut Tentukan Harga LCGC. [online]. Available at: http://www.gaikindo.or.id/mobil-murah-harganya-kemahalan/ [Accessed 14th May 2017]
[iv] Billy, Apfia Ticonny. (2017). Industri Otomotif Beri Kontribusi 10,47 Persen PDB Indonesia. [online] Tribun News. Available at: http://www.tribunnews.com/bisnis/2017/04/25/industri-otomotif-beri-kontribusi-1047-persen-pdb-indonesia [Accessed 20th May 2017]
