High vehicle taxes weaken national auto industry's competitiveness in ASEAN
Kompas Otomotif, 3 Sep '25
Taxation policy is regarded as one of the factors causing the competitiveness of the national automotive industry to fall behind that of ASEAN countries.
The multi-layered tax structure, combined with the dependence of local governments on Motor Vehicle Tax (PKB) as the main source of Regional Original Income (PAD), increases price disparities and limits domestic market growth.
According to automotive observer Yannes Martinus Parasibu from the Bandung Institute of Technology (ITB), this situation reflects structural weaknesses in the economic system outside Jakarta.
When the PAD of most regions relies solely on PKB to finance infrastructure and public services, the result is heavier tax pressure on consumers.
Parasibu noted that the reliance of both the central and regional governments on PKB revenue as the primary source of local income contributes to a higher tax burden.
Data from the Association of Indonesian Automotive Industries (Gaikindo) indicates that the vehicle tax burden in Indonesia is higher than in neighbouring countries.
Vehicle tax in Indonesia can reach approximately 40% of the car price, while in Thailand it is around 32%.
Differences are also evident in other components: Value Added Tax (VAT) in Indonesia stands at 11%, compared with 7% in Thailand.
In addition, the Motor Vehicle Transfer Tax (BBNKB) in Indonesia can reach 12.5%, a levy that is not applied in Thailand. This makes car prices in Indonesia higher than in other ASEAN markets.
Parasibu stated that the absence of a tax harmonisation scheme, such as that adopted in neighbouring countries, contributes to the disparity.
This disparity reduces the competitiveness of the national automotive industry and results in domestic car prices being 20-40% higher than those in neighbouring countries. The impact is reflected in lower consumer purchasing power.
Consumers face higher vehicle prices, while manufacturers experience difficulty in increasing sales volume in a price-sensitive market. As a result, domestic car sales growth has tended to stagnate.
