Driven Web Series 2015 Episode 2_ 001

More on the Trans-Pacific Partnership (TPP) agreement – specifically, the question as to whether or not the prices of vehicles on sale in Malaysia will be affected as a result. Earlier on, it was reported that Malaysia is set to lift the cap on vehicle imports from the United States (US) when said agreement swings into motion.

While that bit is clear enough, the agreement also states that onwards from January 1 2021, “Malaysia shall not provide, for motor vehicles, excise tax credits based on export performance, the use of local content or local value added.” From our understanding, this would result in diminishing incentives for manufacturers to establish CKD facilities here in Malaysia.

As it is now, both CKD and CBU vehicles are bound to the same excise duty, but locally-assembled models are then granted excise tax credits, based on the three conditions listed above. With that perk neutralised, the only difference between CKD and CBU models would be import tax.

Import duties ranges from 10% for CKD vehicles to up a maximum of 30% for CBU units, though vehicles imported from Japan, Thailand and Australia face even lower rates. Whether this difference would be significant enough for manufacturers to consider setting up CKD plants in Malaysia remains to be seen.

Plus, the loss of the excise duty credits will surely affect some brands, especially those that have made heavy investments in the country (initially with the promise of significant excise duty credits).

Driven_Web_Series_2014_Honda_City_vs_Toyota_Vios_vs_Nissan_Almera_004

Also in the spotlight as a result of the TPPA is the “customised incentives” under NAP 2014’s Energy Efficient Vehicles (EEVs) policy.

The agreement states that “in the event a new excise duty structure is introduced,” Malaysia will be required to disclose the process in a manner that “will be transparent and consistent with Malaysia’s commitments under the World Trade Organization (WTO) Agreement” and the TPPA. As such, all the “customised incentives” given to various manufacturers will have to be made public.

Aside from that, the Approved Permit (AP) system will no longer be applicable to vehicles originating from the US. As mentioned, the agreement states that “Malaysia shall not apply any quantitative limit on the importation of originating new motor vehicles from the United States, including any limit applicable to vehicles that are subject an import licensing requirement.”

So, what does this all mean for the rest of us? While all the signs indicate a shift of some sort in prices for new vehicles in Malaysia, the bigger question is by how much. What are your thoughts on the TPP and the aftershocks it will present to the Malaysian automotive sector? Let us know in the comments below.