Indonesia’s largest vehicle manufacturer, Astra Daihatsu Motor, said it is delaying production of its new small car range until the government announces its long-anticipated small car policy.

The company completed construction of a new 120,000 unit/year assembly plant in Kararwang at the end of last year, designated to produce the Daihatsu Ayla and the Toyota Agya. The plant cost IDR2.1 trillion (US$220m) to build and features full stamping, welding and painting facilities as well as a 1km test track.

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Pongky Prabowo, director at Astra Daihatsu Motor, said for the time being the new plant will only produce the Daihatsu Xenia and Toyota Avanza compact MPV ranges – until the government clarifies its position on small car buyer incentives.

Workers employed to produce the small 1.0-1.2-litre ‘eco car’ will continue to train on the newly installed production line until a new regulation is issued.

The Indonesian government has yet to announce incentives for small car buyers which it promised back in 2010 when it launched investment incentives to help the country compete with Thailand. 

For investments above $100m, the Indonesian government offers tax holidays of around five years and duty-free import of manufacturing machinery. When this was first announced, the government also said it will follow up with tax incentives for buyers of small cars with a maximum fuel consumption of 22km per litre. 

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The Ayla is expected to retail at between IDR90-100m with the new incentives. Suzuki and Honda also have plans to build similarly-sized cars, which are widely expected to underpin the next phase of automotive industry and market growth in Indonesia.

The Ayla and Agya models were originally scheduled to go into production at the beginning of 2013 and combined production was expected to have been ramped up to around 8,000 units per month by now.

Industry minister MS Hidayat said the new regulation is still being reviewed by coordinating minister Hatta Rajasa and vice president Boediono but the new regulation is expected to be issued shortly.