Green-Car Incentives Rev Up Indonesian Auto Industry

Auto makers are racing to introduce new models after Indonesia launches a low-cost green-car program that provides luxury-tax relief for auto makers producing qualified low-emissions, high-fuel-efficiency vehicles.

A Ministry of Finance regulation making the 25% luxury-tax cut official is due out later this year.

The low-carbon-emissions program provides fiscal incentives for all categories of vehicles, and is expected to include the exemption from, or reduction of, the luxury tax for low-emissions cars. The goal is to make green cars more affordable for Indonesian consumers and stimulate sales.

The Association of Indonesian Automotive Industries predicts full-year sales of 1.1 million units, after climbing 12% in the first half to 601,952.

To qualify as green, a car must have cylinder capacity of between 0.98L and 1.2L for spark-ignition engines, while the capacity of compression-ignition engines must not exceed 1.5L.

Both gasoline and diesel types must have a fuel-consumption rate of at least 47mpg (50 L/100 km).

The green cars must carry approved Indonesian branding and logos and must satisfy additional technical specifications, including turning radius, ground clearance and other criteria to be listed in forthcoming technical guidelines.

The sale price must not exceed IDR95 million ($8,456). The engine must use RON92 gasoline (for SI engines) or CN51 diesel (for CI engines), both high-octane fuels.

The American Chamber of Commerce in Indonesia cites a Bisnis Indonesia article saying the government is aiming for the green-car program to create between 30,000 and 100,000 jobs by the end of 2014.

The chamber quotes Budi Darmadi, government director general-high technology, as telling the Jakarta Globe that Japanese auto makers Daihatsu, Toyota, Honda, Nissan and Suzuki intend to apply to produce green cars in Indonesia.

Toyota and Daihatsu have an advantage because the Toyota Agya and Daihatsu Ayla, which qualify for tax relief under the green-car program, already are sold in the country.

Johnny Darmawan, president director of distributor Toyota Astra Motor, says the Agya is designed specifically to meet the needs of Indonesian consumers. He is aiming for monthly sales of 5,000 units.

“We hope the Astra Daihatsu Ayla can contribute to the growth of the car market and industry in Indonesia as expected by the government when they issued the (green-car) regulation,” Astra Daihatsu President Director Sudirman MR tells the Jakarta Globe.

PT Honda Prospect Motor says it will offer the new Brio 1.2 L automatic transmission, Brio Sports 1.3L and Brio Satya in response to the green-car program.

Marketing and After Sales Service Director Jonfis Fandy says in a statement the Brio Honda Satya is designed to qualify for the green-car program and is entirely produced in Indonesia with 85% local content.