The ministry of finance’s (MOF) announcement last month that the implementation of the open market value (OMV) excise duty revision had once again been deferred to the end of 2026 has allowed car companies to continue their business as is, said the Malaysian Automotive Association (MAA).
Separately, the delay in introducing the New Customised Incentive Mechanism (NCM), which is being prepared by the ministry of investment, trade and industry (MITI) together with its agencies MIDA and MARii, is also providing the automotive industry with breathing space to plan for changes that it expects to happen when that is eventually introduced.
“The postponement of the OMV/402, which was supposed to be at the end of June, and the new customised incentive has provided greater certainty to manufacturers and distributors, allowing our business operations and sales activities to continue without immediate disruption,” MAA president Mohd Shamsor Mohd Zain said at the association’s first half sales and production review event earlier today.
With regards to the OMV/402, he said that there are no further surprises expected, and that the additional timeframe was meant for the ministry and involved parties to finalise their calculations, reiterating what he had indicated back in January and last month.
“As I mentioned in a previous press conference, based on the engagement that we had with the government, they are working towards the policy having minimal or no impact to pricing. I think the delay has to do with the terms of the calculation of the method, and that needs a bit of time, because manufacturers have different ways of running their business, where one calculation will not suit all,” he said.
“We will leave it to the experts in the government, at MOF, to come up with the formula, but we have been given a commitment that there will be little or no impact,” he added. More importantly, he said that “when it is confirmed, they will give us time to implement it.”
As for the NMC, which has also been pushed back, the association said that it had several engagements with MITI and also its subsidiaries, and that these were positive. “They are actually very supportive in terms of trying to have a much better landing for the industry. So that’s why we have probably about six months more grace,” he said.
Mohd Shamsor said that would be further engagement on the NMC. “We hope that we will be able to meet somewhere (in the middle) where basically the whole industry will be able to continue to run its business while meeting the government’s objective in terms of the whole ecosystem,” he said.
To our question on whether the new mechanism would feature a higher scrutiny on local content, he said this was likely to be the case. “I think the focus will be more on increasing local content, as well as on more vendor development and technological transfers. So, these are the areas where there will be so-called future engagement as well as also preparation for the industry,” he replied.
He added that the association expects that there will be further dialogue on the matter, “and we hope that basically once we have finalised things, it will give us time to also go through things again and continue discussions, rather than it being a surprise implementation,” he explained.
Gazetted on the last day of 2019, but deferred since then, the OMV/402, or PU(A) 402/2019-Excise Tax Regulations (Determination of Value of Locally Produced Goods for Excise Tax Purposes, 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. If you aren’t already aware of what that entails, read our detailed explanation of it here.
Meanwhile, the NMC is aimed at ensuring that investments into the auto industry will build real industrial capabilities. It is expected to be simplified compared to the current policy, but aims to encourage the localisation of critical technologies as opposed to essential manufacturing components. It too has been in the works for some time now.
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