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ast week'€™s launch of three inexpensive cars, dubbed low-cost green cars (LCGCs), may result in fierce competition from other more expensive brands of city cars.

Under the government'€™s LCGC policy, producers of '€œgreen'€ automobiles will get a reduced luxury-goods sales tax, as low as zero percent.

The reduction depends on the types of cars produced and the existing tax.

The luxury-goods sales tax for vehicles ranges between 10 percent and 75 percent, depending on the type of the vehicle, its engine capacity, its passenger capacity and the type of wheel drive.

With the policy, LCGCs may pose a threat to the sales of non-LCGCs, according to an economist at the Indonesian Institute of Sciences (LIPI), Latif Adam.

'€œLCGC prices are more competitive and the ability to save fuel is also better [compared to city cars],'€ he said via a phone interview over the weekend.

Last week, three major car makers '€” PT Astra Daihatsu Motor, PT Toyota Astra Motor and PT Honda Prospect Motor '€” launched their LCGC variants, the 1,000-cubic centimeter (cc) Daihatsu Ayla, the 1,000-cc Toyota Agya and the 1,200-cc Honda Brio Satya.

The prices of the three LCGCs vary from Rp 76.5 million (US$6,724) to Rp 120 million, based on engine capacity, safety technology and other features.

Meanwhile, the price for city cars that include the luxury-goods sales tax start at around Rp 140 million and can go over Rp 200 million.

'€œ[LCGCs] definitely will affect [ the sales] of city cars, not only [those produced by] Suzuki, but also other brands that do not follow the LCGC program,'€ said Davy J. Tulian, sales director of PT Suzuki Indomobil Sales, on Sunday.

Other city cars, especially the ones that are at a similar price to the LCGCs, would lose their market,
he said.

'€œ[City cars] that have a price difference of around Rp 10 million to Rp 20 million [including LCGCs], I think, will end,'€ he told The Jakarta Post in a telephone interview.

Suzuki'€™s only city car, the Suzuki Splash, is sold for Rp 140 million to Rp 151 million, depending on the variants.

To be able to compete with LCGCs, Suzuki would introduce its own LCGC model at the upcoming Indonesia International Motor Show scheduled for Thursday, Davy said.

As for the future of the Suzuki Splash, the company would observe the scale of the shift from city cars to LCGCs in the market during the next four to six months, he said.

If most consumers moved to LCGCs, the company might discontinue production of the Suzuki Splash, he added.

Previously, Suzuki stopped producing its city car variant, the Karimun Estilo, at the beginning of the year and is preparing to replace it with its LCGC.

However, PT Nissan Motor Indonesia marketing director Teddy Irawan said different cars would play in different market segments.

He said LCGCs were made for consumers looking for cars with a price tag under Rp 100 million.

'€œSo it depends on the need of each consumer,'€ said Teddy in a phone interview.

The 1,200-cc Nissan March, Nissan'€™s city car, is priced at Rp 150 million to Rp 170 million.

A 2013 Industry Ministerial regulation defines LCGCs as cars running on fuel with an engine capacity of between 980 cc and 1,200 cc and those running on diesel fuel with maximum engine capacity of 1,500 cc.

The regulation also caps the highest price for LCGCs at Rp 95 million, but allows the price to be increased by 10 percent for safety technology and 15 percent for automatic transmission. (nai)