Jakarta. The government's plan to implement a 12 percent value-added tax (VAT) in 2025 is feared to reduce automotive sales due to price increases.

Several automotive manufacturers are considering measures to address this challenge, as the policy is expected to reduce consumer purchasing power and affect vehicle sales in the coming year.

Hyundai Motors Indonesia's Chief Marketing Officer (CMO), Budi Nur Mukmin, said that the company is still awaiting clarification on the policy's implementation. He said that the 12 percent VAT adds another layer of challenge to a market already under strain.

"This new policy undeniably presents new risks to the market. We are still assessing its impact on sales. It adds pressure to an already challenging environment," he said.

The company is evaluating the potential effects on sales, with a particular focus on consumer financing amid the high ratio of non-performing loans (NPL). Hyundai predicts that the four-wheeled vehicle market in Indonesia could decline by up to 8 percent.

In response, Hyundai is launching new products, such as the hybrid Hyundai Santa Fe, in an effort to maintain consumer interest.

Meanwhile, two-wheeler manufacturers like Astra Honda Motor (AHM) are also updating their product offerings. AHM's Marketing Director, Octavianus Dwi, said the company is closely monitoring the impact of the 12 percent VAT policy and local tax options on vehicle prices and will adjust prices accordingly.

"We will adjust the selling price every year to align with regulatory changes and market demands," he said.

Previously, President Prabowo Subianto said that the 12 percent VAT would be applied selectively, primarily to luxury goods such as cars and motorcycles, and promised to protect the public by excluding basic necessities from the tax.

"We will implement the 12 percent VAT policy, but selectively, only for luxury goods. For the rest of the population, we will continue to protect them," Prabowo said.