This time around, the rejigged opposition’s election manifesto for the upcoming 14th General Election (GE14) did not trumpet lower car prices if it came into power so loudly, unlike in the previous GE, when “Turunkan Harga Kereta” was part of a turun everything campaign. However, dig in and you’ll find that Pakatan Harapan intends to cut excise duties on imported cars below 1.6 litres for first-time buyers. PAS, now divorced from PKR and DAP, has made a somewhat similar pledge.
The Islamic party has unveiled a manifesto for its Gagasan Sejahtera platform, which includes Parti Ikatan Bangsa Malaysia (Ikatan) and Barisan Jemaah Islamiah Se-Malaysia (Berjasa). The manifesto includes the expected promise of abolishing the goods and services tax (GST), but it also threw in something car related – exempting excise tax for first-time car buyers.
The proposal by PAS is to exempt excise tax for first-time car buyers, applicable to vehicles with engine capacities below 1.3 litres. The party also proposes an interest-free loan for the first-timers. Of course, nothing is mentioned on how a potential government can replace the shortfall of income from this stream.
It is an important stream. In 2014, minister of international trade and industry Datuk Seri Mustapa Mohamed said that the government cannot give up excise duties under its (then) current fiscal position. “The auto sector is a very important contributor to the government’s coffers – 75% of the duties collected from the auto sector comes from excise duties,” he said at the 2014 National Automotive Policy announcement.
“On excise duties, the position of the government is as follows. Given the current situation of the budget, it is not possible for the government to review excise duties, but the government, of course, in the next few years, will review the fiscal situation. And as the fiscal situation improves, the government will consider looking into the possibility of gradually reducing excise duties,” he added.
We pay three different kinds of tax on our cars – import duty, excise duty and GST. Import duty is on a downward trend as Malaysia is part of many trade pacts and bilateral agreements – the rate is already 0% for cars coming in from ASEAN countries, for instance. However, excise duties are the prerogative of the government, and as the MITI minister mentioned, it’s a valuable source of income.
Unlike import tax, excise duty is levied on all products, whether imported, manufactured locally or national. Rates range from 65% to 105%, but many car manufacturers pay less than that in exchange for a higher rate of localisation. According to Mustapa, the average excise duty being paid per car is about 50% (2014 figures).
The PAS promise is nothing new. In 2014, minister for youth and sports Khairy Jamaluddin’s proposed a “Youth First Vehicle Scheme” where young people earning under RM4,000 a month can buy their first car tax-free. We calculated – based on a 10% downpayment, 3.5% loan interest rate and a seven-year tenure – and found that one could save from RM30 to RM330 per month for locally-made cars ranging from a Perodua Axia to a Toyota Vios. More on this, here.
But are cheaper cars truly beneficial for the rakyat? Should the plan to scrap excise tax come to fruition, manufacturers and buyers will be rubbing their hands in glee, and the sluggish market might receive a temporary boost. But things might not be so rosy in the longer term. With every high, there’s a hangover, and Thailand has already experienced the cycle.
The Thai auto market contracted severely after the country’s December 2012 expiry of a first-car scheme, which started in September 2011. The government gave a 100,000 baht tax refund for first-car buyers opting for a locally made car priced below one million baht, with an engine no bigger than 1.5 litres.
It was reported that the good intentions of the then Thai government cost it US$2.5 billion (RM9.79 billion) in tax income, according to World Bank estimates. It also left more than 100,000 indebted customers defaulting on their loans because they couldn’t afford to buy new cars under normal circumstances. Of course, owning a car isn’t just about the monthly instalments – there are many other costs involved such as insurance, fuel and parking, just to name a few.
At the proposal stage, cheaper cars are meant to help out the young, but in Thailand, it left many youngsters trapped in debt. The situation would probably be the same or worse should a similar scheme be introduced here.
Malaysian household debt levels are already among the highest in the region (84.6% of GDP as of September 2017; it was RM1.086 trillion or 88.4% of GDP at end 2016) and giving fresh grads an “extra excuse” to buy a new car may be bad for their long term financial health. With up to RM1,000 per month less in savings, that elusive first home will be even harder to achieve.
Also, lower car prices will not necessarily mean that young adults will have more money to spare. It’s likely that many will take the opportunity to use the original budget for an “upgrade” – for instance, if the original budget allowed for a Perodua Myvi, the first-time buyer might now go for a Honda Jazz, for the “same price”. And we haven’t even mentioned the impact on urban congestion.
Anyway, are cars really as expensive in Malaysia as we think? As shared with BFM earlier this month, RM60k buys you the base Yaris J Eco in Thailand. The Myvi-sized hatch is powered by a 1.2 litre engine, rolls on steel wheels and doesn’t have a radio. Contrast that with the RM55k Myvi 1.5 Advance, with its LED headlamps, keyless entry and autonomous emergency braking.
On the other end of the scale, the BMW 530e plug-in hybrid, launched here in January at RM344k, retails from RM457k in the Land of Smiles. The PHEV G30 benefits from CKD hybrid incentives in both countries. Those doing direct conversions from countries such as the UK and Australia might also want to consider the cost of insurance, fuel and inspection there, among other costs. What’s your opinion on car prices in Malaysia?
Looking to sell your car? Sell it with Carro.
Pass
CKD Hybrids are already loosing their full EEV tax incentives. Only reason they are loosing it is because the current govt needs more $$$. Last chance to buy full tax incentive CKD BMW X5e or Merc E350e. Next month no more E350e and we will see the return of the CKD E300 due to the change in tax incentive for CKD hybrids. Heard new G30 530e only enjoyed partial tax incentive instead of full.
Dude, it’s common trend for taxation concept. Wait until EEVs are the norm (hell maybe even the ONLY choice) and the ‘pain’ of taxation comes into play, just the same as when you own a conventional gas-guzzler. The only benefit for EEVs here are the early birds but say goodbye to that bandwagon as it is you aware, the benefits are spiraling down like a train wreck. At the end, the only way to save yourself is to manage your wallet carefully. Hell, not surprised if the gov’t start to impose “congestion tax”; you may own EV and save world (pft), but you sure add your car to the traffic on that federal highway every morning…
fresh grads use iphone X and need a nice car to match with it. well, that’s their mentality.
Believe NOTHING what a politician says UNTIL you see CONCRETE PROOF of action and results later.
They can promise you the moon….but watch out,even a parrot can utter ” sweet promises” without any results.
Mote likely they will send you to the moon instead.lol
Nonsense.
Good
fresh grads papa buy new car with zero tax & interest, fresh grads pakai the used
Will this apply to Bentley, Ferrari or Lambogini?
U didnt read the article at all didnt you. If bentley, ferrari n lambo hv a car 1.3 liter or lower, it is applicable
it seems you read the article but dont fully understand the implications. how about electric car like renault zoe or mitsu miev ?
Pity to those who pay high price for their cars currently.
Surely they will lose a lot of money when come to selling and yet still continue paying the high installments of the difference.
When come to purchase a New car again another new installment whether high and low.monthly repayment one again. No benefit yet due to previous high car loan being lost thru RV overnight.
Furthermore all cars overnight RV will drop like yo yo
Secondly not every private owners change their cars quite often
So remove excise duties only benefit first time buyers but not existing buyers.
Even it is good , the existing government need to answer how they use the tax collected from high car excise duties still.
Did they use it to bailout proton previously or lost thru leakages without accountability .
Is this excise duties apply for national or non national cars ?
Better suggestion is to remove all toll roads and toll collector companies . price the petrol and Diesel like Brunei , Venezuela instead of Using MOP Singapore ( expensive than other world oil markets). Also remove high imported duties of car imported spare parts too.
Besides PAS remove excise duties on cars what other benefits can Rakyat get and enjoy instead of going backwards ?
Brunei and Venu is now basket case. Why follow them?
please get ur facts right k.. MOPS is the cheapest in Asia & if im not mistaken 2nd cheapest after Rotterdam.
Fresh grads nowadays have all their pockets backed up by their lovely parents. Anyone who says otherwise care to explain how does a “fresh grad” afford a new 2.4l Accord, iPhone X and buys 6k purse for their girlfriends？？ they should just focus on cutting car prices for those who earns low income…. I have a job that pays 1.6k/month and I still can’t get a pass on car loans for my Mitsubishi Mirage….
Earn 1.6k, go for Mitsu. Lolz! Theres the problem with these pipu.
Better a mirage than a Saga. All money you thought your have saved from a Saga, will be paid in double or triple to the garage. It is a Proton, don’t play play.
1.6k??…. I think you better go for Kapcai first.don’t let the car ruin your life
I earn 2k last time also use kapcai.
1.6k Mitsubishi month end makan maggi?
Im hoping they or anybody who has the power, focus on scrapping policy. There is too many cars on the road, why add more when there is limited space now.
Yeah boleh beli kereta murah lepas habis belajar tak payah berhutang lagi
My opinion is we need more efficient, puntual mass transportation system….
Kereta mahal komplain, org mau kasi kereta jd murah pun komplain. Apa lu mau bro?
Kereta mahal komplain, org mau kasi kereta jd murah pun komplain. Apa lu mau bro?
Interest Free doesn’t mean Profit Free. Still got Base Financing Rate which is not defined as interest. Islamic Financing maaa…
aku bisnes sendiri pon pakai kelisa je,tak berani lg nak pakai keter baru,
fresh grad pakai kereta baru?
dunia tak selalu cerah,simpan duit,belajar prepare for the worst
Aku pun sama juga macam hang, walaupun aku boleh beli Myvi baru cash, tp i pun tak jadi angkat. Sebab paling ringkas tp paling munasabah, meter temperature dah buang mcm jadahnya kat Myvi baru – cut corner spec (Myvi lama walaupun ada juga kekurangan dr segi handling dan safety area, tapi meter temperature tu ada lagi utk alert in case klu overheat drp tunggu sampai enjin berasap atau terbakar di tengah-tengah jalan)
The problem with car prices:
1) Excise duty increases car prices by > 30 %.
2) GST is charged on top of excise duty.
3) Interest for a loan that covers the above. Meaning we are indirectly paying the bank interest for duties and taxes. Now that is insane.
Car price * excise duty * GST * interest = what we pay for a car.
Example:
30k * 150% * 106% * 3.5% p.a. = 48k * 3.5% p.a. = 62k.
So we’re paying double for what this car is worth over 9 years.
With poor public transport and low income, of course rakyat would be stuck in debt.
Apa penganalisis bodoh ni cuba buktikan? Anak muda perlu komitmen 1k untuk kereta? Kereta bukan barang pilihan sekarang ni bodoh. Semua orang bekerja sekarang pakai kereta. Kau ingat semua kerja kerani ka? Kerani boleh lah duduk kerja dalam office. Lagipun bukan semua site ada public transport.