"Everything has been arranged and the regulation has been signed by the president," Industry Minister M.S. Hidayat told the official Antara news wire service in Jakarta on Wednesday.
The decision, which was signed on May 23, is included in government regulation No 41 of 2013 on a luxury items tax, Hidayat said.
The regulation has not been officially announced but "what is important is that LCGC is allowed to be produced legally now," the minister said.
"I just met the president who told me that he would buy one if necessary," said Hidayat.
“This regulation will cover some programs related to eco-friendly cars, support conservation of energy use and [the use of] alternative energy, for example low-cost and green cars, hybrid, electric cars and cars using biofuel. It will curb taxes and boost demand for greener cars,” he said.
An event will be organized for all automakers involved in the program to produce low-cost and green cars, Hidayat said.
A number of large automotive manufacturers such as Toyota have indicated interest in taking part in the production of low-cost and green cars in the country.
Astra International is partnering with the Japanese automakers Toyota and Daihatsu on the production of low-cost, green models Astra Toyota Agya and Astra Daihatsu Ayla.
The concept green car was displayed at the Indonesia International Motor Show last September.
Astra says these compact five-passenger cars will be easy to drive because they will have a high ground clearance, allowing comfortable navigatation even on poor roads and a small turning radius that will make it easy to maneuver the vehicles on a narrow road.
Astra has said in the past that the company would delay production of its eco-friendly vehicles until government regulations on low-cost, green cars were finalized.
Astra Daihatsu Motors opened a new plant in Karawang, West Java in April that has a production capacity of 120,000 units per year. Daihatsu has set a production goal of 3,000 Ayla cars per month in the facility.
Minister Hidayat said no luxury tax would be imposed on cars or station wagons with engine capacity less than 1,200 cc and with a minimum fuel consumption of 20 kilometers per liter.
The tax exemption also will apply to diesel or semi-diesel vehicles of up to 1,500 cc, also with minimum fuel consumption of 20 kilometers per liter.
The current tax for new vehicles ranges from 10 to 75 percent depending on engine size. Only emergency vehicles are tax exempt.
Hidayat said Indonesia's Industry Ministry is preparing technical steps to support the new government regulation. Hidayat said he wants the flexibility to adopt "advanced technology in security such as air bags or automatic transmissions."
"In principle the program is for long-term implementation," he said. "As for the price, the Finance Ministry will set the figure."
Copyright Environment News Service (ENS) 2013. All rights reserved.