High car taxes are increasingly seen as outdated, especially as four-wheeled vehicles are no longer considered luxury items. The Association of Indonesian Automotive Industries (Gaikindo) is calling on the government to lower these taxes to help boost consumer purchasing power.
Gaikindo Chairman Yohannes Nangoi stressed that cars are no longer symbols of wealth. Today, many Indonesians rely on cars as their primary mode of daily transportation. However, the current tax framework, still based on old assumptions, continues to hold back the growth of the automotive sector.
“Take the luxury goods sales tax (PPnBM), for example. It really needs to be reduced,” Nangoi said in Jakarta. “Cars that are widely used by the public shouldn’t be treated as luxury items anymore.”
This call comes amid a dip in car sales during the first quarter of 2025. Data shows that only 205,160 units were sold from January to March—down 4.7 percent, or roughly 10,000 units, compared to the same period last year. Nangoi pointed out that the current tax incentives, such as the 3 percent PPnBM subsidy, aren’t doing enough to lift sales.
“Are we satisfied with the current state? Not really,” he added. “We need more substantial support for the automotive sector, especially incentives that have a direct impact on consumers.”
He explained that the original purpose of PPnBM was to curb excessive consumption of luxury goods. But over time, car ownership has shifted from being a status symbol to being a necessity.
“Back then, PPnBM was meant to prevent people from splurging on luxury items. But now, cars are a basic need, unless you’re talking about high-end, premium models. Everyday vehicles shouldn’t be taxed the same way,” said Nangoi.
That’s why Gaikindo is urging the government to reevaluate the current vehicle tax system. Adjusting these taxes is seen as crucial to reviving consumer spending and supporting the local automotive industry, especially for cars made in Indonesia.
“When people buy cars today, they’re also supporting the local industry. We’re pushing for deeper cuts to PPnBM, particularly for vehicles manufactured domestically,” he concluded.
