The Indonesian government has extended the luxury tax exemption on small cars until the end of the year as it looks to provide further support for the local industry and market.

The luxury tax on local passenger vehicles with engines smaller than 1,500cc was suspended in March, originally for three months and later until August, while the rate was reduced on larger vehicles, as the government looked to kick-start the domestic economy after the previous lockdown restrictions were eased at the end of February.

The country’s central bank also cut its benchmark interest rate to a new historic low of 3.50% in February to help stimulate domestic consumption which helped the economy rebound by 7.1% year on year in the second quarter of 2021.

The Indonesian domestic vehicle market also rebounded strongly in the second quarter, by 760% to 206,443 units from 24,042 units in the same period of last year, according to member wholesale data compiled by industry association Gaikindo.

Volume surged by a further 164% to 66,639 units in July while year to date sales were up by almost 61% at 460,105 units in the first seven months of the year.