Luxury Auto Tax Hike Plan Has Few Fans

Luxury cars represent a tiny but lucrative segment of Indonesia’s auto industry. It is unclear how a proposed luxury tax will impact sales. (JG Photo/Afriadi Hikmal)

By : Muhamad Al Azhari | on 8:37 PM September 19, 2013
Category : Business

Luxury cars represent a tiny but lucrative segment of Indonesia’s auto industry. It is unclear how a proposed luxury tax will impact sales. (JG Photo/Afriadi Hikmal) Luxury cars represent a tiny but lucrative segment of Indonesia’s auto industry. It is unclear how a proposed luxury tax will impact sales. (JG Photo/Afriadi Hikmal)

Distributors of high-end cars in Indonesia are wary of the government’s plan to increase the import tax on luxury goods, including expensive cars, with some warning of a dent in sales and others bemoaning the lack of details so far.

“I think this could have quite an impact on sales,” Darwin Maspolim, the chief operating officer of Grandauto Dinamika, the sole authorized distributor of Jaguar and Land Rover models, said on Thursday.

“We could see sales of super luxury cars fall for a while.”

The government had announced plans to increase the duty on imported cars to between 125 percent and 150 percent of the retail price, up from the current 75 percent. The proposal is among a raft of measures announced last month in a bid to calm markets flustered by high interest rates and a record current account deficit.

Darwin said news of the tax increase was of concern, especially given that his company had been enjoying strong sales in recent years.

“We are very happy with the Indonesian market. The demand for super luxury cars has been growing quite strongly. We have been so confident, in fact, that we introduced two new models this year,” he said, referring to the introduction of the Jaguar F-Type sports car and the all-new Range Rover sports utility vehicle at the 2013 Indonesia International Motor Show.

“I don’t know whether the tax is targeted at engine capacity or not. We hope not, but we are waiting for more information,” said Darwin, whose company has been distributing Jaguar models throughout Indonesia for the past 15 years.

The total market for luxury cars in Indonesia remains small, although it has seen significant growth over the last few years.

Darwin estimated luxury car sales at fewer than 10,000 units per year — just a fraction of last year’s total car sales nationwide of 1.1 million units.

Helena Abidin, the director of marketing at BMW Indonesia, said the government needed to make clear which car models would be affected by the planned duty increase.

“I can’t say whether we will be impacted or not. It depends what segments will be targeted,” she said.

But Andrew Nasuri, the chief executive of Garuda Mataram Motor, the sole authorized distributor of Audi models, said the higher tax would not put dissuade those with the money to buy luxury cars.

“If you’re someone who can pay more than Rp 2 billion [$178,000], you’re not going to be put off by the amount of tax.”

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