High Taxes Hinder Indonesia From Becoming Sedan-Production Hub
Jakarta. High luxury taxes have inhibited the expansion of the sedan market in Indonesia and left car makers in doubt whether it makes sense to build some of the world's most popular car models in the country, a representative of the car industry association said.
Sedans only account for less than 5 percent of car sales in Indonesia, according to data from Indonesia's Car Manufacturers Association (Gaikindo). The sedan figure is far behind the multi-purpose vehicles (MPVs), or minivans, which are the country's most popular model.
"Luxury taxes for sedans are high: they are expensive. That's why people don't buy them," Jongkie Sugiharto, Gaikindo's deputy chairman, said on Monday. "We have to create the market."
Jongkie spoke at the second Asian Automotive World-Class Manufacturing Summit, a two-day forum attended by over 100 participants from around the region.
In Indonesia, sedan cars are subject to a 30 percent sales tax as soon as their producers deliver them from the factory to the dealers. This is in contrast to the 10 percent sales tax that is applied on other models, including the popular minivans and the low-emissions city cars.
The sales tax, however, does not apply if the sedans are headed overseas as exports.
Gaikindo argues for lower luxury taxes for sedan vehicles, down to 10 percent, to allow car dealers to lower prices of sedans and increase demand for sedans. "If people start buying sedans, automotive companies like Toyota may finally decide to increase the production of sedans in Indonesia," Jongkie said.
The production capacity of Indonesia's automotive industry currently stands at about 1.9 million units per year. However, sedan cars only make up five percent of total car production as of June. MPVs, on the other hand, dominate at 51 percent of production capacity.
Indonesia's current manufacturing setup undermines its ability to tap into the broader global car market, Jongkie said.
"Indonesia is the production base for MPVs, but everyone else around the world buys sedans," Jongkie added. "That's why we're losing to Thailand. They produce everything, from MPVs to SUVs and sedans."
Car makers in Thailand produced 935,251 units in the first half of 2015, according to the Thailand Automotive Institute. The country exported 576,073 units as of June, up nearly 3 percent from the same period last year.
Meanwhile, local car makers shipped off 107,448 units of built-up four-wheelers overseas as of June, up 15 percent from last year's 96,692 units, according to Gaikindo data.
Gaikindo, which has 39 local car manufacturers as members, is targeting an export of 200,000 completely built-up cars in 2015. This figure is down 1.1 percent from the 202.283 cars exported last year.
GlobeAsia
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