We now know that there will be no increase in CKD locally-assembled vehicle prices for a period of one year until December 31, 2020, as announced by the Malaysian Automotive Association (MAA) to the media during its market review for 2019 and outlook for 2020 briefing earlier today.

This might not be the case for CBU fully-imported vehicles, because as MAA president Datuk Aishah Ahmad revealed, the formula for calculating their price has also been revised, albeit in a different manner to that of how open market value (OMV) calculations have been redetermined for CKD.

The changes to the CBU formula, which are slated to take effect on June 1, 2020, could well see prices of fully-imported vehicles fluctuate on a regular basis, determined very much by exchange rates. As Aishah pointed out, the current system of gazetted values have landed prices remaining the same once approval has been given, until a new model comes about.

“Previously, once you had gotten the approval for CBU, until the next model change or a revision to the model code, you could use the old gazetted value for as long as there is no change in the model description,” she said.

Under the new formula, every shipment will be calculated as is, no longer based on a one-time approval and blanket for all future units coming in. “Effective June 1, 2020, it will be based on the transaction value, where a CBU vehicle will have to pay duties based on the latest CIF value and also the latest exchange rate,” she explained.

“It will be based on the exchange rate the day the shipment arrives, and customs will use that to determine the calculation of CBU prices. Normally, principals will adjust CBU prices, some on a six-month basis, some on a one-year cycle, but now, it could be every week that when cars come in, the prices will be different,” she added.

Asked if the new OMV move will make carmakers move towards CBU instead of CKD, Aishah said “no, because CBU cars will go up as well.” There is of course the possibility that prices will also go down, should the forex rate become favourable.

The exact quantum isn’t known, but given that prices of CBU vehicles could keep changing every few months or when stock is exhausted and new units are brought in, car companies will either have to order in smaller shipment quantities or build in enough margin to absorb these changes.

Calculations for CBU vehicles are based on Cost, Insurance and Freight (CIF), to which import and excise duties are imposed. Excise duty is between 60% and 105% (regardless of CKD or CBU), calculated based on the car and its engine capacity, while import duty can reach up to 30%, depending on the vehicle’s country of manufacture.

While vehicles from ASEAN countries are not imposed with import duty, excise duties would still apply to their CIF pricing, and vehicles coming in from Thailand would be affected, given the strong performance of the Thai Baht at present.