The Indonesian government has removed import duties for machinery and goods used in vehicle factories in a bid to promote low cost, green cars.

A new regulation revised a previous regulation by including the automotive industry, particularly assemblers, in the incentives deal, industry ministry director general for high-technology priority industries, Budi Darmadi, told the Jakarta Post.

"We expect that the incentive will help boost investment for the low cost and green car projects," he said.

Several automakers, including Astra Daihatsu Motor and Toyota Astra Motor, are said to have decided to make such cars with new investments.

Budi said no duty would be levied on a wide range of machines used to assemble cars including pressing, stamping and welding. Duties currently range from 7.5% to 15%.

But 30% of equipment used in local plants must be locally made and there is a four year time limit after application.

Indonesia is also offering reduced import duty on some components and a reduction of luxury goods sales tax propoertional to the degree of localisation.

Qualifying cars are those with one-litre engines good for 22km on a litre of fuel or 1.2 litre models that achieve 20km per litre. The tax break will also be provided for manufacturers willing to transfer their technology within five years of starting local production.