We may see significant price increases for locally-assembled (CKD) cars in Malaysia real soon. To jog your memory, in 2019, the finance ministry under the then Pakatan Harapan government prepared the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, which was gazetted on the last day of that year.
Said regulations stipulated a new methodology of calculating a CKD vehicle’s open market value (OMV), which influences how much tax is to be paid and therefore, its selling price. OMV is defined as the final market value of a CKD vehicle ex-factory, before the government imposes excise duties on it.
It’s primarily made up of the cost of the CKD pack, cost of manufacturing and components as well as assembly and administration charges. Note that fully-imported (CBU) vehicles use a different system – prices for these are based on Cost, Insurance and Freight (CIF), on which import and excise duties are imposed.
The then-new regulations set down that in calculating OMV, one must take into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale.
It was this “sale” clause that got industry players up in arms, because it involved areas such as engineering, development work, art work, design work, plan and sketch, royalty payments and license fees (patent, trademark, copyright). Think of it as ‘factory costs’ plus ‘office costs’.
The regulations were supposed to come into force in 2020, but 22 days into the COVID year, the Malaysian Automotive Association (MAA) announced that the finance ministry had deferred implementation to 2021. MAA added that the new regulations could lead to CKD car prices going up by as much as 20%.
By end-2020 it was deferred again, and MAA appealed to the government in 2022 for continued deferment, which was successful – a two-year deferment was granted, until December 31, 2024. That’s 12 days away now, and if no official announcement of yet another deferment is made, every company that assembles cars in Malaysia must, by law, comply.
Besides the planning, forecasting and operational nightmares endured by carmakers as a result of this uncertainty, there’s the regular consumer, who may have to pay more for RON 95 petrol from mid-next year (and/or deal with the resultant price hikes of various goods and services), and pay up to 20% more for a CKD car. Indeed, analysts foresee lower vehicle sales next year due in part to the OMV revisions and targeted RON 95 petrol subsidies.
A lot can happen in 12 days, though. After all, the second deferment was announced just two days before the year ended. But let’s say the government actually follows through this time and CKD car prices really do go up by as much as 20%. One wonders – why would carmakers bother with CKD to begin with? They might as well just import cars in CBU form if the price difference becomes less and less.
Also, the government may lose much more in the long run where external investments and (perhaps more importantly) job opportunities for the rakyat are concerned, than what they would gain in the short term in additional tax collection.
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Yeah, the problem is that, there are too much cars on the road which causes lots of jams nowadays
Which kampung or small town get bad jams?
Or they dont count in your narrow opinion?
Have you seen everywhere not only in KL, but elsewhere in more states….you want to make traffic jam worst? You want to get more pollution? How about food, drinks, hospital and other necessities stuffs? Come on, grow up!!!
Agree brother!!! I drove from work to home and back everyday, but can’t handle jams as needed to reach 2 hours
Yesss
Time to promote EV, plug in hybrid and hybrid, these way will reduce environment….time to move on…this will help better
True. Should have done long time ago, and this article will help to solve traffic congestion problems
The cars are already on the ready, being churned out daily. So, this is not going to solve the problem. The immediate solution is to make it expensive to drive, especially for B40 by removing fuel subsidy for everyone.
Will be good move, then can save more for important necessities including to reduce congestion for so many highways
Agree
How expensive it is to use a car (toll/parking/fuel price) determines how congested road traffic will be. Not the the number of cars that are sold.
Might as well buy my next car in Thailand.
Bagus! Ask you to earn more money to save company, you ask from your boss (if you still remember who is your boss).
I hope, it will be cancelled totally.
Want to cancel….you want to make traffic jam worst? You want to get more pollution? How about food, drinks, hospital and other necessities stuffs? Come on!!!
Go CBU. No point doing CKD anymore when the there is little to no incentives for manufacturers.
Anwar menang rakyat senang
Refer my name
Good. Welldone…can increase gov income
Good
It doesn’t matter how many % the price go up.. When it comes to cars, msians couldn’t care less.. Diesel naik ka, petrol naik ka.. Msian will make noise for a while only… After that business as usual
Better still
It is high time to control traffic congestion throughout the Klang Valley.
Should promote EV, plug in hybrid and hybrid, these way will reduce environment….time to move on…this will help better
ckd is pointless only making some ppl rich at the expense of the rakyat
It’s time. This will help to solve traffic congestion problems
Dulu ada mamat tu kata boleh murah lagi
Retiree who’s living off meager savings is screwed left, right, top, bottom and center. Alas…. new government, new hope????
fancy way to enhance protectionism. this gomen that gomen no difference.
Good. Too many cars otr
Comments in paultan website are always stupid. The solution with traffic jams is by having better public transportation and facilities, not increasing car prices through taxes. Why are you supporting making people harder to move from A to B with expensive cars and insufficient public transport? People also could lose jobs since the price for a unit CKD could be near to a CBU unit, essentially making local factories useless.
Instead of making us pay more for cars, force the gomen to spend more on public transport la. Jepun, Korea, European countries done it already.
Stupid la I tell you.
How expensive it is to use a car (toll/parking/fuel price) determines how congested road traffic will be. Not the the number of cars that are sold.
Government needs more revenue too to help for important necessities
Not to forget the costs of marketing and advertising, sales commission payment to the dealer outlet (including for salesman) and also for the distributor to include some margin buffer used as discounts (for fleet sales or year end promotions.)
Improve public transport dulu, and establish that it could be a better alternative. Only then you carry out stuff like this, or else you’ll just introduce more problems on top of another.
DULU Ada orang ada formula utk turunkan harga kereta.
The same person come with this formular as well. Haiya….
Alza, Saga, Bezza, MyVi and Ativa. Make these very expensive and half the cars in the road will dissappear.
Whats up with the madani bots in the comment section tho. They are all repeating the same point over and over.