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ice President Boediono officially opened Indonesia’s biggest-ever automotive show at the Jakarta International Expo in Kemayoran, emphasizing the government’s commitment to develop alternative cars with eco-friendly technology.

Boediono reiterated his vision of a local automotive industry that could produce cars at low cost, and at the same time, also efficient in terms of energy consumption.

He said the development of vehicles powered by natural gas would be a top priority as the energy source was abundant in the country.

“I encourage business players in the automotive industry, with the support of the government, to make new products that expand the use of gas,” Boediono said in his remarks.

In his address, Boediono also highlighted the government’s support for the development of hybrid vehicles, vowing to issue the necessary policies to make a feasible plan. He also noted that tax incentives would be issued for low-cost, small-engine hybrid cars, which were expected to widely reach the Indonesian market.

The Vice President also discussed electric cars, but he acknowledged that development would take longer due to existing problems, specifically with infrastructure.

Earlier this year, the government announced its plan to initiate a low-carbon-emission vehicle program to curb ballooning consumption of fossil fuels, which is also in line with its goal to cut carbon emissions by 26 percent, by 2020. It aims to start massive production of eco-friendly vehicles, which will include the so-called “low cost and green cars”, electric cars, hybrid cars, gas-fueled cars, in 2014.

The Cabinet’s economic team is preparing tax incentives for the program under a draft rule, and reportedly the incentive will be in the form of a reduction of sales tax on luxury goods (PPNBM) to as low as zero percent, to cut the price significantly.

For low-cost green cars, the reduction of taxes is expected to lower prices to below Rp 100 million, making them accessible to the growing middle class desiring to shift from motorbikes to cars. The cars will also be categorized as “green” due to its fuel economy.

Industry Minister MS Hidayat said that under the draft rule, the government would also provide a tax incentive for hybrid cars to slash prices by around 45 percent, so that their prices fall within the range of non-hybrid cars. As of now, hybrid cars are sold at around Rp 600 million (US$62,815).

“We will offer the incentives to automotive players who import hybrid cars within a two-year period to better familiarize local customers with the vehicles. After that, they should begin assembling the cars here.”

Finance Minister Agus Martowardojo said the fiscal incentive for low-cost green cars would only be given if manufacturers could ensure that production would use more than 80 percent local content.

“We want to really make sure that a large amount of local content will be used because currently, we have a problem collecting income from taxes, customs and non-taxable income. Therefore, if we want to provide a fiscal incentive, we want to make sure there is a great benefit for the people,” he said.

Car sales in Indonesia hit a new record high last year, totaling 894,164 units, up 19.93 percent from 2010. From January to August this year, sales settled at 714,152 units, up 23.13 percent from a year earlier. Automakers expect sales to exceed the 1 million mark by the end of the year.