So, the big day came and gone without a change to car prices. We’re talking about the deferment of the implementation of the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, which expired on December 31, 2024. We’ll call it open market value (OMV) excise duty revision – full explanation later.
By right, without yet another deferment, the then Pakatan Harapan government’s new ruling would have pushed prices of CKD locally assembled cars up by to 30%. Since we didn’t get a flurry of new price updates from the carmakers, it is assumed that the auto industry managed to secure a last minute stay of execution, so to speak.
This has now been confirmed by Malaysian Automotive Association (MAA) president Mohd Shamsor Mohd Zain, who said that as things stand, the ‘402’ (Customs Gazette PU A 402) will be implemented by January 2026. This means a one-year deferment.
“We are very concerned. Based on our understanding right now the 402 will be implemented by January 2026. If that really happens, there will be an average price increase of between 10% to 30% for CKD cars,” he said at today’s MAA briefing on the industry’s 2024 performance. “As far as MAA is concerned, we are now looking into ways on how we can engage further (with the government), we will continue the engagement before the deadline,” he added.
An increase of 10% to 30% is huge, but carbuyers won’t be the only ones affected – it would be a big blow to the entire Malaysian auto industry.
“If that (OMV revision) happens, there will be a lot of spiral down effects for the future years, in terms of lower sales, lower volume, especially for CKDs. It will also have an impact on our local industry, especially our suppliers. There’s a lot of after effects that we’re concerned about. We will continue to engage and hopefully we’ll be able to get some kind of understanding and also an alternative way to overcome this,” the MAA chief said.
Here’s an explanation of the bullet we just dodged, and the timeline. The controversial ‘402’ – gazetted on the last day of 2019 – 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 PH-era regulations set 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 that pandemic year, MAA announced that the finance ministry had deferred implementation to 2021. 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. The latest deferment – confirmed today – is until December 31, 2025.
While carmakers and consumers can breathe a sigh of relief for now, this uncertainty isn’t good for a company’s planning, forecasting and operations. Without clarity, investments will also be hampered – you don’t want to invest in local production and ‘live on the edge’ every December hoping for the best, do you? No exaggeration here – the second deferment was announced just two days before 2021 ended!
If prices of CKD cars do go up by as much as 30%, perhaps carmakers will not bother with the hassle of local production and just bring in CBU imports – this would be a loss for the industry and country. Yes, the government would collect more taxes with the revised OMV in the short term, but if higher prices damage sales volume (all-time high in 2024, we have momentum), production and eventually job opportunities for the rakyat, it could be an example of being penny-wise but pound-foolish.
Perhaps the subsequent administrations after Pakatan Harapan do see the logic behind MAA’s argument, hence the constant stays of execution, but annual deferments surely isn’t the way to go – this needs to be reversed once and for all.
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Penny-wise, pound foolish. That more or less sums it up about this present government. Be in no doubt on the foolish part. Just about given up already
Mana itu video si Rafizi menjelaskan harga kereta mahal pasal duti excise kereta yang tinggi? Gua nak suruh dia dan kerajaan Madani ni bungles dan balik kampung
yum yum sedap and kenyang croni croni…..
At this point, I swear they are doing this as a way to test out our public’s reaction. If it’s positive, they’ll go ahead and implement the changes, if the reaction is negative, they’ll defer it to a later date.
It’s already negative since they planned it back in 2020, you think why it keep delayed under BN-PN era
I don’t like the idea of paying more, but just look at our roads. We have too many cars on the road, obviously cars are too affordable.
it’s affordable only due to 9 years loan. this is less common at developed countries.
Agree, especially from a Penangite perspective. Use the tax money to improve public transportation. Unfortunately, most of the money will end up in rent seeker pocket.
Its not affordable, since many people especially the young working adult bankrupt because of car loan. The actual issue is lack of proper public transport and it’s infrastructure. Only in KL the public transportation is ok, but still not reach to whole area, hence the need of car. What about other states? Car became necessity and even with price increases, people still buying, willing or not. Hence, a lot of car on the road nowadays. Look at Singapore, daily life can be done without car at all, everywhere reachable by public transport and efficient. Still people buy car with high prices and COE because they want it, not because they need it.
Why do you think someone get into bankruptcy? It’s not just about car loans, it’s just because the purchaser don’t pay the car loans. Why don’t they pay the car loan? Is it because of buying low quality cars? Lot of repairing? Lot of other loans? To many things to buy or to many things to enjoy? In Islam Riba already Haram like eating a Pig. Why don’t they just save some cash and buy cheap cars. Why support the new and expensive cars? Do u change your cars every year?
You are totally brainless. There are too many cars on the road is due to every family wants to have many children ! Each child grows up & will buy their own car. If not for cars, then it will be like Indonesia or Vietnam where the street is full of bikes & still have jam. Also, if prices of cars are low, people will buy a better class car to replace their old car. The number of cars on the road is the same. Money save on buying cheaper cars will also go to driving the economy as they will have more buying power & not be tied up with high longer term loans.
Problem is not enough public transport. The lack of it is forcing people to buy cars. If the government wants people to buy less cars, they have to buy more busses, trains etc
Rakyat will definitely say no
petrol naik, diesel naik, electricity naik, gaji tak naik. this government is the worst, bring back Najib
So u prefer more ‘rakyat money’ tp be stolen rather than being used for the country itself is it?
You can tax. But you cannot over, tax. Once the over taxation is achieved, there will be a sharp fall in sales or migration of people to more tax friendly countries.
So vios next time rm150k?
Mana formula piji nakturunkan harga kereta dulu tu!!! Makin naik ada la. this is madanon stailllll
the banks will just increase the loan tenure to 12 years. no worries, people will still buy cars.
Bila nak naik harga petrol ini?
Tiap-tiap hari jam giler especially bila musim cuti dan weekend highway jam macam pasar pagi.
Dah macam semua orang T20 melambak pergi cuti-cuti
you have LGE to thank for this stupid policy. got duties, got excise then want to mark up the cost of sales into OMV.
no wonder he wasn’t popular, i voted PH but this LGE is not on my go to list.
He is accountant who only know how to save coin but loss the dollar.
Good job. Make car really expensive and force people to move away from car-centric to PT centric.
This is the only way forward.
Let’s wait and see what happens to car prices next year. It looks like manufacturers may not enjoy the same profit margins they have had over the past decades. Companies like UMW, Honda Malaysia, Proton, Perodua, and others will be audited from start to finish to determine the actual cost to consumers.
If any government do this. It would be difficult for their die hard supporters or cybertroopers to defend them.