Indonesia is a market dominated by MPVs. Besides the fact that the people carriers can well, carry more people, why aren’t sedans more popular in ASEAN’s biggest auto market? In 2016, sedans accounted for about 2% of the 1.1 million cars sold.

Sedans attract a higher tax rate because they are included in the “luxury goods” category in the system, and booted cars are subject to taxes of about 30% to 40% because of this quirk. Compare this to the 10% to 20% tax incurred by MPVs and it’s clear why sedans aren’t being pushed by carmakers and demanded by the public.

This will change soon, as Indonesia plans to lower taxes on domestic sedan sales in a bid to promote the country as a manufacturing hub for sedans, a finance ministry official told Reuters.

The plan to cut sales tax for sedans has been included in a revision to the country’s Value Added Tax and Luxury-Goods Sales Tax Law, which the government will propose to parliament soon, said Goro Ekanto, who heads revenue policy study at the finance ministry’s fiscal policy office. “How much the reduction is and its impact will be discussed further before a decision is made,” he added.

Indonesia’s industry minister Airlangga Hartanto said by cutting taxes, the government hopes to get carmakers to produce more sedans, not only for the domestic market but also for exports. “We hope to enhance the potential to export sedans and one way to do it is to bring tax on sedans into alignment. In the global market, demand for sedans is much higher than for MPVs and SUVs,” Hartanto said.

Currently, sedans with engines up to 1.5 litres in size attract 30% luxury tax, while those with 1.5L to 3.0L engines are taxed at 40%. This has discouraged manufacturers from making sedans in Indonesia – for that, they have Thailand as a regional base and Malaysia for domestic consumption.

Gaikindo, the car manufacturer’s club that hosts the annual GIIAS, has proposed the tariff on sales of small sedans be reduced to 10% to match that of small MPVs.

This could perhaps be the reason why we saw a sedan concept car from Daihatsu for the first time at this year’s GIIAS show. The stunning DN F-Sedan Concept might be Daihatsu’s (very early) preparation for a future Indonesian car market where sedans have the tax freedom to compete with hatchbacks and MPVs.

GALLERY: Daihatsu DN F-Sedan