It’s that song again, but this should hopefully be the last time anyone hears it. The long-standing topic that is implementation of the open market value (OMV) excise duty revision continues. It was supposed to have come into effect at the start of this year, having only a minimal impact on CKD vehicle prices.
Then, at the very end of 2025, the ministry of finance (MoF) announced that the OMV revision had been deferred once more, by six months to July this year, with the extra period intended for calculations to be finalised. It looks like that the finalisation process is still going on, because the PU(A) 402/2019-Excise Tax Regulations (Determination of Value of Locally Produced Goods for Excise Tax Purposes has been pushed back yet again by another six months, to the end of 2026.
In a letter that was sent by the MoF on June 26 to the Malaysian Automotive Association (MAA), the ministry said that the implementation of the OMV will now be deferred until December 31, 2026, and as such, there will be not be any additional excise duty imposed on the cost of sale, general expenses and administration as well as profit of CKD vehicles until then.
As it was with the last deferment, there are no further surprises expected, with the additional timeframe meant for the ministry and involved parties to finalise their calculations. In January, MAA president Mohd Shamsor Mohd Zain said that the reason for this was because the different OEMs involved in CKDs had different ways of declaring their business, and there was quite a bit of fine-tuning needed.
Yesterday, he reiterated this as being the primary reason for the implementation being pushed to December. “The reason for the extension is to finalise all calculations and ensure that the proposal is fair, and that everyone is managed in a level playing field,” he told paultan.org in a phone call. As previously indicated, the new method is expected to have ‘very little or no impact to pricing’ of CKD cars, and that still stands, he added.
A recap on the OMV/402, which has of course had its implementation being deferred for the longest time. Gazetted on the last day of 2019, the revision stipulates a new methodology of calculating a CKD vehicle’s OMV, which influences how much tax is to be paid and therefore, its selling price.
Defined as the final market value of a CKD vehicle ex-factory before the government imposes excise duties on it, the OMV is primarily made up of the cost of the CKD pack, cost of manufacturing and components as well as assembly and administration charges. This is different to what fully-imported (CBU) vehicles work on – prices for these are based on Cost, Insurance and Freight (CIF), on which import and excise duties are imposed.
The revision seeks to introduce additional calculations to the equation, expanding excise duties to take into account non-manufacturing costs such as the sale aspect of a vehicle. This of course would also involve associated elements such as marketing, art/design work, administrative expenses and profit being brought into the equation, which would naturally increase the price of a CKD vehicle in the process.
Of course, any effect of the OMV/402 has never been transferred to buyers. The regulations were supposed to have 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’s appeal to the government in 2022 for a continued deferment was successful, with a two-year postponement granted until December 31, 2024, and finally, once again to December 31, 2025, before being postponed to July 2026, with this latest announcement bringing the deferment to the end of 2026.
As we’ve said previously, any delay impacts a company’s planning, forecasting and operations, and the question still remains as to how much of a pricing increase there will be – the government has said that the OMV/402 revision for CKD vehicles will not affect 90% of Malaysians, especially those from B40 and M40 groups. The answer to this then at the end of the year, unless the goalpost is moved yet again.
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