Indonesia's new vehicle market continued to decline sharply in January 2021, by almost 34% to 52,910 units from already weak year-earlier sales of 79,983 units, according to member wholesale data compiled by industry association Gaikindo.

GDP declined by 2.1% last year on weak domestic consumption, investment and exports, as the country struggled with the highest number of COVID-19 infections in South-east Asia. Last year's prolonged restrictions on consumer and business activity, which have continued into 2021, have had a devastating impact on the small and medium business sector.

While the central bank cut its benchmark interest rate to a historic low of 3.75% last year, the vehicle market plunged by over 48% to 532,027 units - making it the region's worst performing market in 2020.

Last month sales of passenger vehicles dropped by over 38% to 37,801 units, while sales of trucks and buses were down by just under 20% at 15,109 units.

Toyota reported a sales decline of over 34% to 16,033 units last month; followed by Daihatsu with an almost 37% fall to 8,993 units; Honda 7,231 units (-43%); Mitsubishi Motors 6765 (-26%); and Suzuki 6,400 units (-39%).

Earlier this month the Indonesian government said it will suspend the luxury tax on passenger vehicles with engines smaller than 1500cc for three months between March and May in the hope of reviving the vehicle market. The current luxury tax rate is between 10% and 30% of the cost of the car.

In the following three months, inclusive of June and August, the government will offer a 50% luxury tax discount, which will be halved again in the subsequent three months.