Indonesia approves cheap, green car tax incentives

JAKARTA, June 5 (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 M.S. Hidayat said no luxury tax would be imposed on cars or station wagons with engine capacity of up to 1,200 cc and with a minimum fuel consumption of 20 km per litre. Tax exemption would also apply to diesel or semi-diesel vehicles of up to 1,500 cc, also with minimum fuel consumption of 20 km per litre.

The current tax for new vehicles ranges from 10-75 percent 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. (Reporting by Nilufar Rizki and Yayat Supriatna; Writing by Jonathan Thatcher; Editing by Robert Birsel)