Jakarta. Indonesian car owners pay up to ten times more in annual vehicle taxes than their Malaysian counterparts, a disparity that industry leaders say is discouraging middle-class consumers and weakening the domestic automotive market.

Kukuh Kumara, Secretary General of the Association of Indonesian Automotive Industries (Gaikindo), on Thursday pointed to the Toyota Avanza -- a popular multi-purpose vehicle manufactured in Indonesia -- as an example of the steep tax burden facing domestic consumers.

“The Toyota Avanza is made and sold in Indonesia, but also exported to countries like Malaysia. In Indonesia, the annual ownership tax is Rp 5 million, while in Malaysia, it’s only Rp 500,000 for the same model,” Kukuh said.

He argued that the high tax rates are turning cars into luxury items that are increasingly out of reach for lower- and middle-income buyers. While factory prices remain relatively affordable, taxes and other levies significantly inflate the final retail cost.

“For example, a car priced at Rp 100 million when it leaves the factory ends up costing Rp 150 million at the dealership. That Rp 50 million difference is almost entirely due to taxes,” he explained.

Kukuh also warned that rising vehicle prices are not in line with consumer purchasing power. While average middle-class incomes are growing at just 3 percent per year, car prices are increasing at a rate of 7.5 percent annually.

“This growing gap is making it harder for consumers to afford new vehicles and is starting to weigh heavily on national auto sales,” he said.

Indonesia’s car sales reached only 865,000 units in 2024 -- a figure Kukuh believes could decline further this year. He cautioned that sustained weakness in the market could ripple through the entire automotive supply chain.

“Even if the automakers manage to stay afloat, what will happen to our parts suppliers if this trend continues?” he said.