The coronavirus pandemic and movement restrictions to curb its spread has dampened appetite for new cars, but as Malaysia showed with its sales tax exemption, consumers can be lured to showrooms if there are tax breaks to be had. Indonesia has now announced the temporary removal of a ‘luxury tax’ on some cars to boost sales and assist its auto industry.

The republic’s economic ministry said that from March to May, the government will remove the luxury tax for sales of sedans and two-wheel drive cars with engine capacity below 1,500 cc. Currently, the luxury tax rates for those cars are between 10% to 30%, Reuters reported.

For the next three months till August, the authorities will give a 50% discount for luxury tax payments, and the following three months will see the discount halved again, in a move to get punters to move fast. The ministry said that the temporary scheme would be evaluated every three months.

The ministry said that the auto industry is important for Indonesia’s economy, as carmakers, dealers and workshops combine to provide employment for 1.5 million people. This tax incentive could boost production by 81,752 units, it added.

Auto sales in ASEAN’s most populous country and largest economy has recovered after a sharp drop at the start of the pandemic, but have yet to return to pre-Covid levels. Indonesia’s auto sales in 2020 was just over 532,000 units, around half of the 2019 total. Carmakers association Gaikindo has been pushing the government for months for tax breaks to entice buyers, so this is a win for the industry.