Import duties for cars from Japan and Australia will be gradually reduced to zero by 2016, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed has said, according to various reports. The issue of excise duties, which forms a significantly larger percentage sum in the scheme of things, is reportedly under consideration, even though it was stated last year that there were no plans to reduce the excise duties on cars.

According to Bernama, import duties for cars from Japan and Australia currently stand at 15% and 13.6% respectively (supposedly, the gradual reduction will be in made in a five percent drop annually, in the case of duties for Japanese imports, so by 2016 this will be down to zero).

Another source reports that this reworking of the import duties covers vehicles of up to 2.5 litres engine capacity, and that currently, vehicles from Japan with an engine capacity of 2.5 to 3.0 litres are already fully exempt from import duties. The move is said to cover around 21,000 CBU units from Japan annually.

Meanwhile, Mustapa said new car prices have started dropping by RM2,200 to RM17,000 since last year, depending on models. Further price cuts would be possible with the liberalisation of the automotive industry through the implementation of Free Trade Agreements (FTA), he added.

The minister told a media conference in Putrajaya yesterday that Malaysia is currently talking to the European Union, Turkey and Bangladesh about signing FTAs, and that the government has been working with car companies to voluntarily reduce prices.

He added that any liberalisation should be gradual to allow the industry to adapt and to ensure its 300,000-or-so employees are not adversely affected. “Plus, the second hand and resale market alone employs about 100,000 people and the revenue from car taxes has helped to subsidise the cost of fuel and other amenities,” Mustapa was quoted as saying.

In related news, Proton has issued an official response to the MITI announcement, and here are excerpts from that statement:

“Proton Holdings Berhad welcomes the announcement made today by Datuk Seri Mustapa Mohamed, Minister of International Trade and Industry pertaining to the Government’s views and intention to gradually have new policies for the automotive industry in formulating ways to reduce the prices of cars in Malaysia.

As this involves the entire ecosystem of the industry, Proton will further study all aspects relating thereto and the possible impact it has on not only the company but the entire local automotive industry, to ascertain its next course of action, future plans and directions for not only the company, but also the entire ecosystem of the industry vis a vis our domestic and international markets.

Any decision on this will be made after due discussions and consideration with all our stakeholders, which include our vendors, suppliers, dealers, pre-owned vehicle operators and of course, the consumers who have all along been supportive of Proton cars.

Nevertheless, just like all the other automotive industry players, any policy shifts towards market liberalisation has already been anticipated by Proton, and the company is optimistic that it can compete in a fully liberalised market with affordable and good quality cars for our customers.”

Response to MITI’s announcement from other industry stakeholders such as MAA and Pekema here.