Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

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The government has responded to the open market value (OMV) excise duty revision quandary that has the local car and motorcycle industry up in arms. The finance ministry (MoF), together with the ministry of investment, trade and industry (MITI), said that reports of CKD locally assembled car/bike prices going up by up to 30% in 2026 are inaccurate.

On the annual deferment of implementation of excise tax regulations under PU(A) 402/2019-Excise Tax Regulations (Determination of Value of Locally Produced Goods for Excise Tax Purposes (latest round pushes it to January 2026), MoF says that it is reviewing the vehicle valuation method for it to be fair, neutral and consistent.

“There has yet to be a final decision. MoF, together with MITI and the automotive industry, is currently reviewing the vehicle valuation method to ensure that the imposition of tax is carried out in a fair, neutral and consistent manner,” it said in a brief statement yesterday.

Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

MAA president Mohd Shamsor Mohd Zain

When disclosing that the auto industry secured a one-year deferment last month, Malaysian Automotive Association (MAA) president Mohd Shamsor Mohd Zain said that the effect of OMV/402 will be an average price increase of between 10% to 30% for CKD cars, which would lead to lower sales and volume, affecting carmakers and suppliers negatively.

“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.

“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,” Mohd Shamsor added.

Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

The Malaysia Automotive Component Parts Manufacturers (MACPMA) weighed in, with its president Chin Jit Sin telling paultan.org that the auto industry contributes to more than 4% of Malaysia GDP and provides employment to over 200,000 people. Lower volume could cause plant closures and job losses.

“Motor vehicle manufacturers will stop making new investments immediately to produce new models of motor vehicles in Malaysia, and just bring in CBUs from other ASEAN or RCEP countries, since there is less difference in the cost of CBU versus CKD vehicles,” he said.

It’s not just cars that will be affected. Hoo Wan Tim, president of Motorcycle and Scooter Assemblers and Distributors Association of Malaysia (MASAAM), told paultan.org that prices for CKD bikes would go up by up to 20%, impacting Malaysians in the B40 and M40 income brackets.

Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

“MASAAM would also like for the government to relook into the OMV/402 situation to avoid a significant cost impact to the livelihoods of consumers. Especially so that when it comes to motorcycles, our consumers are mostly in the B40 and M40 groups that will be even more severely impacted. For those in the need of basic transportation, including those in the gig economy (delivery riders), that will be a massive increase,” he said.

It’s a view shared by the Malaysian Motorcycle and Scooter Dealers Association (MMSDA), who said that dealers would have to pass down the price hike to buyers. He told us that the impact would affect smaller capacity locally assembled motorcycles the most. “Most buyers of kapcai or motorcycles below 150 cc belong to the B40 income group, who rely on these motorcycles as their main means of livelihood. A price increase would undoubtedly add to their financial burden,” he said.

Here’s an explanation of the bullet we just dodged, and how we got here. The controversial ‘402’ – gazetted on the last day of 2019 – stipulated a new methodology of calculating a CKD vehicle’s 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.

Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

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 is until December 31, 2025.

Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

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 – no one wants to invest in local production and ‘live on the edge’ every December hoping for the best. 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 OEMs 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 the auto industry’s argument, hence the constant stays of execution, but kicking the can down the road via annual deferments surely isn’t the way to go.

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Danny Tan

Danny Tan loves driving as much as he loves a certain herbal meat soup, and sweet engine music as much as drum beats. He has been in the auto industry since 2006, previously filling the pages of two motoring magazines before joining this website. Enjoys detailing the experience more than the technical details.

 

Comments

  • omv guy on Feb 12, 2025 at 11:05 am

    maa president so hensem

    Like or Dislike: Thumb up 3 Thumb down 7
  • Karam Singh on Feb 12, 2025 at 11:36 am

    The opposition trying to stir speculations, causing uneasiness with many and hatred towards the government. No need to be smart to see the reason why.

    Like or Dislike: Thumb up 3 Thumb down 22
    • omv guy on Feb 12, 2025 at 11:53 am

      pls tell me where the opposition is involved in this?

      Like or Dislike: Thumb up 14 Thumb down 1
    • Opposition Cyber Coolies on Feb 12, 2025 at 12:33 pm

      Glass heart feels reading our speculative, miss information, lies spreading at PT hahaha

      Like or Dislike: Thumb up 5 Thumb down 1
    • Kea Was on Feb 12, 2025 at 12:38 pm

      No need just like Tenaga, Water, RON 95 what ever subsidy all just leak out first at a staggering higher rate but eventually it will be quite lower so it portrays as good for the people that is the strategy.

      Like or Dislike: Thumb up 8 Thumb down 1
    • Lets See on Feb 13, 2025 at 2:03 pm

      When you live in glass houses don’t throw stones so why did PH started throwing stones when they were in Opposition?

      Like or Dislike: Thumb up 0 Thumb down 0
    • You will be opposition in next time.

      Like or Dislike: Thumb up 0 Thumb down 0
  • Our car price already expensive. See how many Accord & Camry on the road compared old time then you know.
    Soon, only local car brand left and Malaysian seem to be poor

    Like or Dislike: Thumb up 6 Thumb down 0
    • Lets See on Feb 13, 2025 at 2:05 pm

      Basically sales are for the most cheapest basic brand P2 and it indicates that people are having to buy downwards; people previously going for Toyotas have downgrade to P2. This is bad sign of our economy and how this Govt is fumbling it in the face of Trump upheavals.

      Like or Dislike: Thumb up 0 Thumb down 0
  • Gomen should honour asean free trade agreement for motor vehicles like during badawi’s time. We had several vehicles assembled in thailand sold locally. But najib stopped it.

    Like or Dislike: Thumb up 4 Thumb down 0
    • Lets See on Feb 13, 2025 at 2:05 pm

      Yes he did, now he is in jail by the people who wanted to sell it here. See what they did

      Like or Dislike: Thumb up 1 Thumb down 0
  • anwar menang, rakyat dikencingkan on Feb 13, 2025 at 9:19 am

    Gov’t denies up to 30%!!!..
    They will deny and then later do the oposite…
    Just like toll… suthuadi say…

    hhhaarrriii ini kita mmmeeennnaaanng.. dddaaalllaamm 24 jam toll di hapuskan!!… podah myrandy sunni!!

    Like or Dislike: Thumb up 3 Thumb down 0
  • Tariffs on May 07, 2025 at 8:33 am

    Malaysia complaining about US imposing tariffs on our goods while we happily impose tariffs on imported vehicles under the pretense of “Excise Duty”.

    Like or Dislike: Thumb up 1 Thumb down 0
 

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