High Taxes Make Cars in Indonesia Expensive, Rates Can Reach 40%
High vehicle prices in Indonesia are once again in the spotlight amid the sluggish national automotive market. One of the main factors highlighted is the substantial tax component in vehicle selling prices.
This situation is seen as suppressing people’s purchasing power and hindering the growth of the domestic automotive industry, including in the electrification era.
Agus Purwadi, a researcher from the National Center for Sustainable Transportation Technology at Institut Teknologi Bandung (NCSTT ITB), revealed that the vehicle pricing structure in Indonesia is heavily influenced by high tax burdens.
“If we look at our automotive product prices, 40% of it is tax, the rest is the goods,” said Agus during the Toyota Motor Manufacturing Indonesia (TMMIN) Media Workshop on Tuesday (14/4/2026).
This condition makes vehicle prices in Indonesia relatively more expensive compared to other countries with higher income levels.
“So you can imagine, it’s not strange that Indonesians with a GDP of around $5,000 buy cars more expensively than Japanese people,” he said.
Agus believes that vehicles should be tools for economic productivity, not a burden on society. He emphasised that the fiscal policy approach needs to be changed to better encourage economic growth.
“If we tax too heavily, purchasing power drops, the economy drops,” he explained.
The government needs to shift the paradigm from imposing high taxes to providing stimulus. This step is believed to encourage broader economic activity and increase production volumes.
“That’s why we propose to drive the market; indeed, this tax must be changed into stimulus or incentives mindset so that the economy grows,” Agus clarified.
He also highlighted that policy measures should not be based solely on percentages, but on absolute values that have a real impact on society.
According to him, an incorrect approach can make the economy not move optimally.
“So this is the fastest way to drive the economy to spin,” he stated.