Remember the big hoo-ha early this year when the customs department rolled out new excise duty regulations that would have seen prices of CKD locally assembled cars go up? Feels like ages ago, but it was in 2020.
After uproar from the auto industry, which was caught by surprise, and consumers alike, the then Pakatan Harapan government backtracked and announced a “special exemption” that essentially maintained the car price status quo for 2020. However, it was meant to be a temporary relief, and car prices are due to go up in 2021, albeit gradually.
Here’s a recap and brief explanation. Basically, the excise duty rate does not change, but what’s new is the methodology of how the open market value (OMV) of a vehicle is calculated. OMV is the final market value of a CKD car ex-factory, before the government imposes excise duties on it, with profit margin and sales tax to top things off.
An assortment of components determine the OMV, and these include the cost of the CKD pack, cost of manufacturing and components as well as assembly and administration charges. However, the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019 – prepared by the MoF and gazetted on December 31, 2019 – sought to add new components into the OMV calculation.
Under the new regulations, the computed value to determine duties will now take into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle (ex-factory), but also of its sale.
The “and sale” clause also now applies to areas such as advertising and marketing, warranty and trade royalty, plus wages and commission. Also included are general and administrative expenses such as rental, utilities and office supplies, among other costs. Naturally, this raises the OMV and applicable excise duty.
Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said then that with the new tax structure, CKD car prices would have gone up by up to RM33,000, and that the association’s members – some of whom have invested heavily in assembly operations in Malaysia – would have had to rethink their plans for our market.
Despite the last minute reprieve, the move by customs (which is under the finance ministry) caused uncertainty, which affected industry players in their planning. “Automotive companies were facing headwinds at the start of 2020 with the sudden change in the OMV valuation methodology by customs in January, resulting in companies facing delays in new car launches and disruptions in selling their vehicles,” Aishah said today at the MAA’s 1H 2020 review.
It may be status quo now, but if things don’t change, we may be facing higher CKD car prices come January 2021. This excise duty-induced hike will be combined with the expiration of the sales tax exemption (100% for CKD, 50% for CBU) under the government’s Penjana programme, which is in place from now till the end of the year. It will feel like a double whammy for the consumer, even if the SST exemption expiry merely brings prices back to normal levels.
However, with a new government in place, MAA is trying to plead its case again. “We wrote an appeal to the government on the OMV. They said that they’re looking at it, reviewing it, to make it more acceptable to the automotive industry, and we’re waiting for the outcome,” Aishah said today in response to our question on the status of the excise duty OMV issue.
“I think it should be very soon that we will know the outcome. It’s work in progress,” she added. Here’s hoping that the carmakers succeed in their appeal and that middle ground can be found for the benefit of all parties. Fingers crossed.
Looking to sell your car? Sell it with Carro.
That’s why before it is too late, buyers should buy Honda City. Looks more handsome too.
Many happier in their Proton Saga FL, saved RM 45K. Looks more handsome too.
This is the biggest joke ever. Car prices going up? I thought we already have super high car prices the past 20 years. Why is it going higher?
This is illogical. Why does the Government want to burden the people more? Already half our pay goes to paying our car loans.
Yahoo! Kereta murah, minyak pun dah murah! Rakyat Malaysia hepi! Thank you so much!
Kereta murah, minyak murah! Keja makan takda
Rakyat resoundingly said no problem. There will be other jobs.
https://paultan.org/2020/07/24/maa-anticipates-a-70000-spike-in-car-sales-with-sst-exemptions-sets-300k-target-for-second-half-of-2020/
According to Jobstreet, 2.5 million people have lost their jobs because of Covid. No point have kereta murah and minyak murah when you have such high unemployment rate and these 2.5 million people cannot afford a car now
Now with gig economy culture, even a car can be seen as an investment for work so by having cheaper cars, the gomen is smart to foresee more sales would lead tomore job creation. Kudos to our farsighted gomen thinking.
Honda City is getting a new model soon, why should car buyers want to spend money on an outgoing model?
Because most buyers said outgoing city looks more better than downgraded ah beng city gn1 2020 with baby g20 series tailights
or buy the honda civic before it hits over RM150k, going to the D-segment pricing.
they should review roadtax structure as well
Because it is too cheap now? Why?
Horsepower road tax
Car weight road tax
Government talk a lot but until now basic things also they have not sorted out. Like road tax and cc of engine. Honda CRV owner with his RM180k car pays cheaper road tax than my 3.0 Accord which is 20 years old. I am paying RM2000 but my car is worth only RM5k
Pls sort ore important issues please. After all most Malaysians drive old cars with 2.0 cc engine and above. Our cars are worth only RM3000 to RM5000 but we pay big hefty road tax bills
You think they want to lower your taxes?
You have a old Honda and since you don’t buy a new car and give them sales/excise/whatever tax – they just make you pay more for the larger engine in your Honda.
Should go by emissions road tax now.
In this regards the Thai government is doing a way better job
Well yea, Thai car prices got raised so rapidly they cost more than here for the same cars now.
RM dropped rapidly.
Thier civic only 100k baht
Their minimum salary only 500 baht. Syukur Mesia keta masih mampu beli…
thai car generally more expensive now compared to malaysia due to stronger baht
Duties on cars in whatever form thread a tight rope between revenue collected by governments to pay for maintenance and construction of facilities by road users and/ or,… punitive measures to restrict car usage (as in S’pore) or (punitively) as a form of reverse collection of taxes – after failing to collect taxes properly. There is an unfairness in this country that cars are so expensive just to penalise the more wealthy in order to make up the loss in poor tax collection
its a sad industry
stupid argument and logic…as if the govt has anything to do in the production
That’s one of the reasons used car sales will continue to soar. High new car price and rapid depreciation.
Yes yes, to support tin kosong cars like Proton and Perodua. We the consumer don’t want garbage Malaysian cars, we want quality foreign cars.
The same goons who promised cheaper this and that finally ended up raising prices of everything. That’s why never trust a politician!
Anyway thanks to the person who changed the way OMV was calculated, I managed to sell my 2017 CRV at a good price just before the MCO!
Yes i agree car prices to increase more, unless cars must be scrap above 15yrs. Too many junkies still plying the road n that’s the root cause for all the traffic jam. Gov building so many infras r just wasting money