Indonesia approves cheap, green car tax incentives

JAKARTA (REUTERS) - Indonesia said on Wednesday it has approved tax exemption for the production of low-cost, low-emission cars, a long-awaited move that should be a significant boost for Toyota Motor Corp and Daihatsu Motor Co Ltd joint ventures in Southeast Asia's biggest economy.

Both Japanese producers have local tie-ups with Astra International Tbk PT, which dominates Indonesia's fast-growing auto market, and already have production facilities in place for so-called low-cost, green cars, or LCGC.

Industry Minister MS Hidayat said no luxury tax would be imposed on cars or station wagons with engine capacity of up to 1,200cc and with a minimum fuel consumption of 20km per litre.

Tax exemption would also apply to diesel or semi-diesel vehicles of up to 1,500cc, also with minimum fuel consumption of 20km per litre.

The current tax for new vehicles ranges from 10-75 per cent depending on engine size. Only emergency vehicles, such as ambulances, are tax exempt.

Some analysts have forecast that the policy could eventually boost Indonesian vehicle consumption by a third.

Indonesian auto sales, buoyed by an expanding middle class, hit a record 1.1 million last year though the figure is expected to be slightly lower this year because of likely fuel price increases and higher downpayment requirements.

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