New 125% luxury car tax in Indonesia to deter sales

Indonesia will increase the luxury tax on luxury cars to 125% from 75% starting this month, aiming to narrow its trade deficit by slowing imports and curbing spending by the wealthy, however the actual effects may be limited because it applies to only a slim fraction of the overall auto market.

The planned increase will affect sedans and some other cars, encompassing those with 3-liter or larger gasoline engines or 2.5-liter or larger diesel engines. All of these are pricey luxury cars, with about 17,000 units sold last year, accounting for only 1.4% of new-car sales.

For market leader Toyota Motors, the vehicles to be affected by the tax hike accounted for a small percentage of sales last year, but it will apply to half of all Lexus models. Prices will probably be pulled up by around 30%, says the head of a Toyota sales company.

Meanwhile, U.S. and European manufacturers, which sell a larger percentage of high-end cars, will be hit much harder. BMW sold more than 400 vehicles last year to which the luxury tax hike will apply, accounting for 16% of sales. This figure rises to 24% for Mercedes-Benz and to 64% for Chrysler, maker of the popular Jeep.

Lexus Gallery Showroom Jakarta