OMV excise duty revision

  • Potential car price increases from new OMV duties in 2026 to keep new car demand strong in 2025: analysts

    Potential car price increases from new OMV duties in 2026 to keep new car demand strong in 2025: analysts

    Remember the open market value (OMV) debacle? Yes, the one that was said to potentially make locally-assembled (CKD) cars cost 10-30% more and that the government has deferred to January 2026, after having deferred it at least three times. BIMB Securities expects this to spur forward buying, especially in the fourth quarter this year, reports The Edge.

    “Expectations of new OMV duties, potentially effective by 2026, may spur early purchases and boost 4Q 2025 sales. We maintain our neutral view on the automotive sector, supported by resilient underlying demand and favourable income policies,” BIMB Securities said in a research note. Kenanga Investment Bank has also previously supported the forward buying theory.

    However, global supply chain disruptions, softer consumer sentiment amidst rising living costs and strong Chinese competition – including the EV price war – remain key downside risks, BIMB Securities added.

    Potential car price increases from new OMV duties in 2026 to keep new car demand strong in 2025: analysts

    How many new cars will Malaysia buy this year, after an insane 816,747-unit record last year? RHB Investment Bank predicts 730,000, Hong Leong Investment Bank 750,000, CIMB Research 760,000, Maybank Investment Bank Research 790,000 and Kenanga Investment Bank 805,000.

    If we take the Malaysian Automotive Association’s 780,000 units as the official 2025 total industry volume (TIV) forecast, we’re now 41% of the way there (316,737 units year-to-date May 2025, down 5% versus 333,309 units year-to-date May 2024).

    May 2025 saw 68,007 new cars sold in Malaysia (+12.4% from April’s 60,527 units), driven by stronger passenger vehicle sales, which rose 12.1% month-on-month (MoM) to 55,971 units. Commercial vehicle sales also grew 15.2% MoM to 5,250 units.

    Malaysia’s best-selling EVs so far this year
    Clockwise from left: Proton eMas 7, BYD Sealion 7, BYD Atto 3

    “While we think the impending expiry of the tax exemption on CBU (fully-imported) EVs post-2025 could result in a surge of EV sales volumes this year, the local EV market remains modest, accounting for circa 2% of total car sales. Hence, it is unlikely that a surge in EV demand would materially move the TIV needle in 2025,” RHB Research said in a note, adding that the 2026-expected OMV implementation contributes to the sector’s policy overhang.

    Although the road transport department’s (JPJ) data says that 44% more EVs were sold in May (4,152 units) than April, the EV rise in Malaysia is generally gradual – analysts say cars that are either partially (hybrids and plug-in hybrids) or fully powered by electricity (EVs) still face affordability constraints, with many of them still priced outside the mass market.

    The RON 95 petrol subsidy rationalisation (which will happen, we just don’t know exactly when) may help public transport gain traction as an alternative, but it largely depends on how the policy is carried out, said RHB Research, with analysts predicting that the move could drive middle-income consumers to EVs or more fuel-efficient ICE cars.

     
     
  • 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

    Click to enlarge

    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.

     
     
  • Up to 20% price increase on kapchais in 2026 will burden B40 – MMSDA urges review of OMV/402 issue

    Up to 20% price increase on kapchais in 2026 will burden B40 – MMSDA urges review of OMV/402 issue

    In January, it was confirmed by the Malaysian Automotive Association (MAA) that government had provided a deferment for 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 and was supposed to take effect in January.

    Had that stay (which is the latest of many) not been given, the regulations – also known as the open market value (OMV) or ‘402’ excise duty revision – would have seen seen prices of CKD locally-assembled vehicles go up by up to 30% as of this year, which would obviously not have been good news for all concerned, automotive industry and buyers alike.

    The reprieve isn’t for long though, because it was also revealed that the deferment is only for another year, which means it runs out on December 31, 2025, and the new ruling is set to be implemented by January 2026.

    Up to 20% price increase on kapchais in 2026 will burden B40 – MMSDA urges review of OMV/402 issue

    It’s obvious that the move will have detrimental effects on the whole automotive eco-system, with the MAA already having voiced its concern about the OMV revision, and the Malaysia Automotive Component Parts Manufacturers (MACPMA) and the Motorcycle and Scooter Assemblers and Distributors Association of Malaysia (MASAAM) also stating their apprehension about the matter.

    The prevailing sentiment is echoed by the Malaysian Motorcycle and Scooter Dealers Association (MMSDA), which said that manufacturers would struggle to absorb the higher duties that would inevitably come about should the OMV revision happen, and that there would be a cascading effect from that.

    According to association chairman Datuk Wee Hong, motorcycle dealers would thus have to adjust their prices in accordance with the manufacturers’ pricing adjustments.

    Up to 20% price increase on kapchais in 2026 will burden B40 – MMSDA urges review of OMV/402 issue

    “As motorcycle dealers, our business principle is based on the cost price of goods. Buying at a higher price means selling at a higher price. If manufacturers state that the implementation of OMV will impact motorcycle prices, with an estimated increase of 10% to 20%, then motorcycle dealers will have to adjust prices accordingly,” he said in a written reply to paultan.org‘s questions on the matter.

    He added that the impact of a price increase would affect smaller capacity locally assembled motorcycles the most, and with that, its buyers. “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 stated.

    Wee said the MMSDA is firmly on the same page with other industry associations on the matter. “We are willing to collaborate with stakeholders in the motorcycle industry to urge the government to review its decision not to further extend OMV 402 in order to maintain price stability and avoid negatively impacting the B40 community. This will also help prevent disruptions to the growing gig economy,” he said.

    Up to 20% price increase on kapchais in 2026 will burden B40 – MMSDA urges review of OMV/402 issue

    However, the association is preparing contingency plans should the new OMV come into place. “Dealers will monitor market demand and changes while adjusting the services and offers provided to customers — such as complimentary helmets, raincoats and other benefits — to mitigate the adverse effects of price increases on the market.” he explained.

    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.

    Under the revision, OMV – which is defined as the final market value of a CKD vehicle ex-factory before the government imposes excise duties on it – is set to include not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale, the latter being where the contention is currently centred.

    Up to 20% price increase on kapchais in 2026 will burden B40 – MMSDA urges review of OMV/402 issue

    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. This was successful, with a two-year deferment being granted until December 31, 2024. The current deferment is until December 31, 2025.

    While the government undoubtedly wants to increase its coffers, introducing the new OMV is probably not the best way to go about it, because it would not just affect the competitiveness of the local automotive market but ultimately burden consumers. Indeed, given the many reprieves that have surfaced, it’s obvious that very few people think the new calculation methodology is a good idea.

    Such a blanket move would also go against the current government’s “tax the rich” approach of late, and so perhaps the High Value Goods Tax (HVGT) – which has been put on hold – should be revisited if new tax streams are being looked at.

     
     
  • Kenanga IB maintains 805k-unit TIV forecast for 2025 amidst OMV deferment, Perodua likely to benefit most

    Kenanga IB maintains 805k-unit TIV forecast for 2025 amidst OMV deferment, Perodua likely to benefit most

    The government has deferred to January 2026 the implementation of the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, or for brevity’s sake, OMV/402.

    Full explanation here, but this basically means that come January 2026, Malaysians could pay between 10% and 30% more for a locally-assembled (CKD) car. So anyone wanting a CKD car should look at getting it this year, and this forward buying interest is what’s supporting Kenanga Investment Bank’s decision to stick to its 805,000-unit total industry volume (TIV) forecast for this year, Bernama reports.

    Notably, Kenanga IB stands out for being the only organisation so far to foresee more than 800,000 new cars to be sold in Malaysia this year – RHB Investment Bank predicts 730,000, Maybank Investment Bank Research 750,000, CIMB Securities 755,000 and the Malaysian Automotive Association 780,000. A record 816,747 new cars were sold in Malaysia last year, breaking 800k for the first time and beating 2023’s 799,821-unit record by 2.1%.

    Kenanga IB maintains 805k-unit TIV forecast for 2025 amidst OMV deferment, Perodua likely to benefit most

    Theophilus Chin’s idea of what Perodua’s first production EV could look like

    Kenanga IB said in a note today that Perodua, which holds 44% market share and has an all-CKD line-up with a high localisation rate, is likely to benefit the most, but the premium segment may be hit as upper-tier M40 and T15 groups may hold back from buying new cars, downsize to smaller cars or switch to hybrid and electric vehicles as targeted RON 95 petrol subsidies loom ahead.

    “In general, the industry’s earnings visibility is still good, backed by a booking backlog of 150,000 units as of end-December 2024. More than half of the backlog is made up of new models, alluding to the appeal of new models to car buyers. This trend is likely to persist throughout 2025 given a strong line-up of new launches,” it said, adding that battery-electric vehicles could also prop up the numbers as it’s the last year for fully-imported (CBU) EVs to be tax-free.

    “We expect more favourable incentives from the government, which has set a national target for EVs and hybrid vehicles of 20% of TIV by 2030 and 38% by 2040. Meanwhile, the government will speed up the approval for charging stations. The number of proposed charging stations is currently at 4,235 (3,354 built to date), and this should more than double to 10,000 by end-2025,” it said.

     
     
  • Motorcycle prices to rise by up to 20% in Malaysia due to OMV revision, will severely affect B40 – MASAAM

    Motorcycle prices to rise by up to 20% in Malaysia due to OMV revision, will severely affect B40 – MASAAM

    Earlier this month, the Malaysian Automotive Association (MAA) confirmed that the industry received a big reprieve in the form of a 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, also known as the (OMV) or ‘402’ excise duty revision.

    Without yet another deferment (one year, till December 31, 2025), the then Pakatan Harapan government’s new ruling would have pushed prices of CKD locally assembled cars up by to 30%, and that would have been disastrous to new car sales. A collapse in sales would affect local production of OEMs and their many local suppliers, and eventually impact jobs.

    We’ve already heard the valid and logical concerns of MAA and Malaysia Automotive Component Parts Manufacturers (MACPMA), but did you know that the local motorcycle industry and bike buyers would also suffer from an OMV revision?

    Motorcycle prices to rise by up to 20% in Malaysia due to OMV revision, will severely affect B40 – MASAAM

    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.

    “In alignment with MAA and MACPMA, 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,” Hoo told us.

    “For bikes, the price increases for locally-assembled models will be between 10% to 20%. For example, if a bike is currently priced at RM10,000, with the excise duty revision, the same model will have to be sold at RM11,000 or RM12,000 next year. For those in the need of basic transportation, including those in the gig economy (delivery riders), that will be a massive increase,” he said.

    Motorcycle prices to rise by up to 20% in Malaysia due to OMV revision, will severely affect B40 – MASAAM

    The MASAAM chief pointed out that the motorcycle market is mostly CKD. “While for cars there is a wide selection of CKD and CBU models for customers to choose from, the bike industry is pre-dominantly CKD. Over 90% of the market, especially in the more affordable range are CKD,” he explained.

    Earlier, we pointed out that should the price gap between CKDs and CBU imports narrow thanks to the OMV-affected price increase, carmakers will no longer bother with the hassle of local production and just bring in CBU imports – this would be a big loss for the industry and country, an example of being penny-wise but pound-foolish. The same applies to the bike industry, too.

    “On the industry side of things, this may also open up doors for parallel importers coming into the country, because as CKD costs go up, CBU players that have not made any investments into the country can bring in vehicles into Malaysia,” Hoo said, adding that the government should have a balanced view between increasing tax collection in the short-term versus attracting investment.

    Motorcycle prices to rise by up to 20% in Malaysia due to OMV revision, will severely affect B40 – MASAAM

    “MITI and MoF need to strike a good balance between potentially higher tax collection and bringing in new investments into the country. At the same time, they should also take care of companies that have brought us here thus far, especially the ones that have set up factories, CKD operations, employed local workers and supported the local supply chain ecosystem,” he said.

    “Perhaps larger manufacturers may be able to absorb some of the impact, but there will be smaller players that won’t have the capacity to do so. If so, the burden will have to be passed on to the end consumer. And ultimately if that company is incapable of selling their bikes at the inflated prices, we may even see people losing their jobs at retail, factory and supply chain levels too,” the MASAAM president warned.

    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.

    Motorcycle prices to rise by up to 20% in Malaysia due to OMV revision, will severely affect B40 – MASAAM

    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’.

    Motorcycle prices to rise by up to 20% in Malaysia due to OMV revision, will severely affect B40 – MASAAM

    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 this month – 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!

    Perhaps the subsequent administrations after Pakatan Harapan do see the logic behind the argument of carmakers, automotive vendors and now, the local motorcycle industry, hence the repeated stays of execution, but annual deferments surely isn’t the way to go – this regulation needs to be reversed once and for all.

     
     
  • OMV/402 revision to cause 10-30% price increase of CKD cars, job losses, closure of factories – MACPMA

    OMV/402 revision to cause 10-30% price increase of CKD cars, job losses, closure of factories – MACPMA

    The Malaysia Automotive Component Parts Manufacturers (MACPMA) has shared its viewpoint on the OMV/402 matter. In an official statement issued to paultan.org, the association said the implementation of OMV/402 may result in a drastic reduction in vehicle production, which just hit an all-time high of 790,347 units in 2024.

    “When implemented, the OMV excise duty revision will cause an average price increase of between 10% to 30% for CKD motor vehicles. This is expected to dampen the sale of all motor vehicles,” said Chin Jit Sin, president of MACPMA.

    “Though the implementation of the OMV has been deferred to Jan 2026, 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 added.

    OMV/402 revision to cause 10-30% price increase of CKD cars, job losses, closure of factories – MACPMA

    Both situations are said to result in lower volume of locally-assembled (CKD) vehicles, which has a knock-on effect for component manufacturers in Malaysia. The association pointed out that the current automotive industry contributes to more than 4% of Malaysia gross domestic product (GDP) and provides employment to over 200,000 people. Lower production volumes could also cause plant closures and job losses, it added.

    With more fully-imported (CBU) vehicles being brought into Malaysia due to smaller price difference compared to CKD vehicles, this can also tip the balance of trade for the automotive sector to be more import-heavy.

    So, what’s the deal with OMV/402? We have an entire post on this topic but in a nutshell, its implementation, which is scheduled for January 2026, would cause the prices of CKD cars to go up by as much as 30%.

    OMV/402 revision to cause 10-30% price increase of CKD cars, job losses, closure of factories – MACPMA

    This is because OMV/402 stipulates 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. 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.

    This has long been in the making and started with the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, or OMV excise duty revision as we call it.

    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.

     
     
  • OMV excise duty revision deferred to Jan 2026 – CKD car prices up by 10-30% next year if ruling maintained

    OMV excise duty revision deferred to Jan 2026 – CKD car prices up by 10-30% next year if ruling maintained

    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.

    OMV excise duty revision deferred to Jan 2026 – CKD car prices up by 10-30% next year if ruling maintained

    “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.

    OMV excise duty revision deferred to Jan 2026 – CKD car prices up by 10-30% next year if ruling maintained

    MAA president Mohd Shamsor Mohd Zain

    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.

    OMV excise duty revision deferred to Jan 2026 – CKD car prices up by 10-30% next year if ruling maintained

    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!

    OMV excise duty revision deferred to Jan 2026 – CKD car prices up by 10-30% next year if ruling maintained

    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.

     
     
  • OMV excise duty revisions to take effect soon – CKD car prices in Malaysia to go up by 8% to 20% in 2025?

    OMV excise duty revisions to take effect soon – CKD car prices in Malaysia to go up by 8% to 20% in 2025?

    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.

    OMV excise duty revisions to take effect soon – CKD car prices in Malaysia to go up by 8% to 20% in 2025?

    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%.

    OMV excise duty revisions to take effect soon – CKD car prices in Malaysia to go up by 8% to 20% in 2025?

    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.

     
     
  • Targeted RON95 subsidy, OMV revisions to lower vehicle sales in Malaysia next year – analysts

    Targeted RON95 subsidy, OMV revisions to lower vehicle sales in Malaysia next year – analysts

    Only 12 days to go before we bid goodbye to 2024, and having wrapped up November with year-to-date sales of 731,534 units, Malaysia is expected to close the year with a record total industry volume (TIV) of 800,000 units.

    However, analysts expect TIV to decline next year due in part to targeted RON 95 petrol subsidies and open market value (OMV) revisions, The Star reports, with CIMB Securities predicting 755,000 units but noting that EV adoption could increase.

    “National brands, led by Perusahaan Otomobil Kedua Sdn Bhd or Perodua, are expected to retain their dominant market share,” the research house said.

    The Malaysian Automotive Association (MAA) previously estimated that revising the OMV calculation could raise the average selling prices of locally-assembled (CKD) vehicles by 8%-20%, but the implementation has been deferred multiple times – the latest extension expires December 31, 2024.


    Proton eMas 7 (left) launched this week; production version of Perodua eMO-II Concept due Q4 2025

    “We also anticipate higher BEV adoption in 2025, driven by new model launches, new entrants and rising competition among EV players ahead of the duty exemptions for imported models ending in 2026, after which domestic assembly will take precedence,” the brokerage said, citing targeted RON 95 petrol subsidies as another potential EV-boosting factor.

    As 85% of Malaysians will continue to get subsidised RON 95 petrol, this should sustain Proton and Perodua models’ affordability for first-time buyers and the mass market – CIMB Securities predicts a 65% market share for the national brands in 2025 (1H 2024, 67.8%).

    Meanwhile, Maybank Investment Bank Research forecasts a slightly-lower 750,000-unit TIV in 2025: “We expect the sustained strength to be driven primarily by local original equipment manufacturers (OEMs) in the mass-market segment (sub-RM100,000), supported by robust order backlogs for certain OEMs, availability of value-for-money models and improved consumer spending power from the civil service wage hike in December 2024 and minimum wage hike in February 2025.”

    “However, growth may be constrained by production limitations, as key OEMs with remaining backlogs (such as Perodua, Proton and Toyota) are already operating at full capacity,” it noted.

     
     
  • Carmakers receive two-year deferment of new OMV excise duty regs, no big CKD price hikes till end-2024

    Carmakers receive two-year deferment of new OMV excise duty regs, no big CKD price hikes till end-2024

    At the 2022 review by the Malaysian Automotive Association (MAA) this morning, president Datuk Aishah Ahmad revealed that the automotive industry has received a two-year deferment of new open market value (OMV) excise duty regulations from the government. This means that there will be no major price increase for cars due to duty/tax reasons until the end of 2024.

    “OMV, we have got approval for two years, so the issue is resolved temporarily for two years. After the two-year period, we’ll have to appeal again and we’ll look at the outcome,” Aishah said when quizzed on the matter, adding that MAA – the club that represents all carmakers in Malaysia – received the letter of approval from the government in the last week of December 2022.

    When asked on the new government’s stand on the issue, Aishah said that it’s early days and MAA will continue to engage with the policymakers. “We have to let the new government settle down first. Closer to the date, maybe next year, we’ll appeal again and put forth our suggestions on why we have to maintain the old OMV,” she said.

    Carmakers receive two-year deferment of new OMV excise duty regs, no big CKD price hikes till end-2024

    What’s this all about and why does OMV matter? Here’s some background. In 2019, the then Pakatan Harapan government came up with revised OMV calculations for excise duty. Prepared by the finance ministry and gazetted on the final day of 2019, it was originally planned to come into effect in 2020, but MAA has successfully appealed its case till now.

    With higher OMV, CKD locally assembled vehicles will attract higher taxes. OMV is the final market value of a CKD car ex-factory, before the government imposes excise duty on it. An assortment of components determine the OMV, and these include the cost of the CKD pack, cost of manufacturing and components as well as assembly and administration charges.

    The gazetted new regulation adds new components to the OMV calculation, adding into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale.

    Carmakers receive two-year deferment of new OMV excise duty regs, no big CKD price hikes till end-2024

    The “and sale” clause applies to areas such as engineering, development work, art work, design work, plan and sketch, royalty payments and license fees (patent, trademark, copyright). There’s a clause that widens the net considerably by including “any direct and indirect costs incurred or accounted in the manufacture and sale of the dutiable goods.

    The inclusion of this “office cost” versus only “factory cost” (our terms) factors in the sales and marketing costs of a particular model at the distributor level. As excise duty is levied on a car’s OMV, the RRP that consumers pay will rise accordingly. Up to 20%, MAA said then. CBU imports use a different system – import and excise duty are imposed based on based on Cost, Insurance and Freight (CIF) values.

    Read more about OMV and car prices here.

     
     
  • MAA has appealed to gov’t to continue deferring new OMV excise duty regulations, says signs are positive

    MAA has appealed to gov’t to continue deferring new OMV excise duty regulations, says signs are positive

    The Malaysian Automotive Association (MAA) says it has submitted another letter asking the government to reconsider the association’s appeal regarding the revised open market value (OMV) calculation for excise duty, which was prepared by the ministry of finance (MoF) and gazetted on December 31, 2019.

    Originally planned to come into effect in 2020, the new structure has not been implemented, although it remains a matter of when rather than if. The association has been continuing to ask for its introduction to be delayed, stating that the new excise duty calculations could further increase CKD car prices if it is enforced next year.

    Its president, Datuk Aishah Ahmad, said that MAA was still waiting for a reply from the finance ministry (MOF) regarding OMV. She added that the association has had talks with the customs department over the matter.

    MAA has appealed to gov’t to continue deferring new OMV excise duty regulations, says signs are positive

    “MAA has held discussions with the customs department, and they have indicated that they will support for the OMV calculation method not to be revised,” she said last week during the MAA briefing on the performance of the automotive market for the first half of 2022. “So, we are still waiting for the official approval letter from MOF. They (MOF) are still looking at this matter but I expect there to be positive signs,” she added.

    Previously, Aishah had said that given the current economic climate, any additional price increase would burden consumers and affect the competitiveness of the local automotive market.

    Based on the terms of the new regulations, completely-knocked-down vehicles will be liable to pay more taxes due to a change in methodology of how the OMV of a vehicle is calculated. This takes into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale. You can read more about it here.

     
     
  • No increase in Malaysian CKD car prices entering 2021 – excise duty regulations on OMV to remain the same

    No increase in Malaysian CKD car prices entering 2021 – excise duty regulations on OMV to remain the same

    Earlier this year, it was reported that new excise duty regulations put forth by the customs department would result in the prices of locally-assembled (CKD) cars going up by as much as 20%. However, that is no longer the case, according to Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad, when contacted by paultan.org.

    UPDATE: The government has decided to extend the new vehicle sales tax exemption period to June 30, 2021, which sees a 100% sales tax exemption for new CKD cars, and 50% for CBU cars.

    Before proceeding further, here’s a recap of the situation. Previously, the customs department issued the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, which was prepared by the ministry of finance (MoF) and gazetted on December 31, 2019.

    Based on the terms of the new regulations, completely-knocked-down vehicles will be liable to pay more taxes due to a change in methodology of how the open market value (OMV) of a vehicle is calculated. This takes into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale. You can read more about it here.

    No increase in Malaysian CKD car prices entering 2021 – excise duty regulations on OMV to remain the same

    Originally planned to come into effect this year, the move caused an uproar within the Malaysian automotive industry, resulting in the previous government to backtrack and announce a “special exemption.” This kept car prices as is until the end of 2020 and was always believed to be a temporary relief, with prices set to go up in 2021, albeit gradually.

    While excise duty regulations will remain unchanged entering 2021, car prices are set to increase come the new year due to another reason: the end of the sales tax exemption (100% for CKD, 50% for CBU) under the government’s Penjana programme. As previously reported, there will be no extension of the programme, which has been in place since June 15 and will end on December 31 this year. At the very least, we won’t face a double whammy of prices going up due to the return of sales tax and new OMV duties. See, it’s not all bad news in 2020.

     
     
  • New Malaysia excise duty regulations introduced for 2020 could see CKD car prices “rise by up to 15%”

    New Malaysia excise duty regulations introduced for 2020 could see CKD car prices “rise by up to 15%”

    Last December, a news report indicated the possibility that locally-assembled cars could cost more from this year as a result of a potential restructuring of automobile duty rates by the government.

    UPDATE: On January 22, the ministry of finance (MoF) said that there will be no increase in CKD vehicle prices for a period of one year until December 31, 2020. The Malaysian Automotive Association (MAA) says that new OMV calculations could see CKD car prices go up by varying degrees (0-20%), depending on the model, although any increases will be gradual over coming years and would only begin from 2021.

    This is now looking like a reality, if what is based on that determined in the new, publicly available Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, prepared by the ministry of finance and which was gazetted on December 31, 2019, is interpreted right.

    Under the terms of the new regulations, which is now technically in force, completely-knocked-down (CKD) vehicles will be liable to pay more taxes. This is because the methodology of how the open market value (OMV) of a vehicle is calculated has been changed.

    What is OMV? Well, it is the defined final market value of a CKD vehicle ex-factory, before the government imposes excise duties on it. An assortment of components determine the OMV, and these include the cost of the CKD pack, cost of manufacturing and components as well as assembly and administration charges.

    This is different to that for a fully-imported CBU vehicle, which works on a price based on Cost, Insurance and Freight (CIF), to which import and excise duties are imposed. Excise duty is between 60% and 105% (regardless of CKD or CBU), calculated based on the car and its engine capacity, while import duty can reach up to 30%, depending on the vehicle’s country of manufacture. Vehicles from ASEAN countries are not imposed with import duty.

    New Malaysia excise duty regulations introduced for 2020 could see CKD car prices “rise by up to 15%”

    The gazette adds new components into the OMV calculation. Under the new regulations, the computed value to determine duties will now take into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale.

    According to a source familiar with the matter, the new way of calculating OMV, which introduces duties to the sale of the goods raises new questions and has caused confusion for OEMs and distributors.

    Previously, the OMV only took into account costs for the manufacture of a said item, but the “and sale” clause also now applies to areas such as engineering, development work, art work, design work, plan and sketch, royalty payments and license fees (patent, trademark, copyright).

    The clause 4.2 (d) widens the net considerably by including “any direct and indirect costs incurred or accounted in the manufacture and sale of the dutiable goods.” This, the source points out, is “frightening,” because the MoF/Customs did not engage the auto industry prior to the release of the gazette.

    The inclusion of this “office cost” (versus only “factory cost” before this) could potentially widen the scope significantly as it will factor in the sales and marketing costs of a particular model at the distributor level. As excise duty (which rate remains unchanged) is levied on a car’s OMV, the base price’s increase will also cause chargeable excise duties – and the final car price – to rise accordingly.

    New Malaysia excise duty regulations introduced for 2020 could see CKD car prices “rise by up to 15%”

    The source said that the previous method of calculating value – ex-factory – is the more fair approach as that’s the convention. Levying a product should be just that, levying the product, he said. There’s also the question of double taxation, as car companies pay corporate income tax on their profits as well, as with all businesses.

    Another point is that the CBU fully imported vehicles continue to be taxed the same way – on the vehicle itself and nothing extra – which brings some disparity. “This is unfair to those who have invested in CKD operations in the country,” he said.

    Clearly, this move is to extract more revenue from the business of selling cars, but with this duty restructuring, the cost price of cars are set to increase, and it’s likely that car companies will pass it on to the consumer.

    Asked on the possible quantum, the industry source said: “A rough figure would be CKD cars costing around 12-15% more with this new way of calculating OMV.”

    New Malaysia excise duty regulations introduced for 2020 could see CKD car prices “rise by up to 15%”

    Looking at the bigger picture from the immediate effect – which is extra revenue for the government coffers and possibly higher vehicle prices – there will be knock-on effects, aside from being unpopular with the public.

    “Higher prices will translate to lower volume for car assemblers in Malaysia, which will in turn affect employment if they decide to scale down operations,” the source said.

    “Should that happen, the government will collect less in corporate taxes, and Malaysia will lose out on investment to neighbouring countries. There will be no extra revenue for the government,” he said, casting doubt on the overall effectiveness of this move and branding it as a lose-lose scenario for consumers (higher prices) and carmakers (lower volume) as well.

    All this would go against the grain of what the ministry of international trade and industry (MITI) had intimated last year, when it said that it was considering a reduction in excise duty for vehicles as a possible way for bringing car prices down. Deputy minister of international trade and industry Ong Kian Ming had said that while a reduction in excise duty would mean less direct revenue, it would be offset by total collection due to increase vehicle sales.

    New Malaysia excise duty regulations introduced for 2020 could see CKD car prices “rise by up to 15%”

    With all this, plus the added uncertainties of changing policies heading into the future (the NAP has been delayed multiple times), car companies in Malaysia looks to have a tough time planning ahead, especially those with CKD operations. How would they plan their investments if nothing is set in stone, and could or would change in an instant without sufficient notice?

    Rumours are that a few brands are already considering to pull potential investments in upgrading their CKD plants if this is to go through. Going the CBU route sounds like a simpler process, but the reality is far from it, because approved permits for imports cannot exceed 10% of CKD total industry volume (TIV), as stated by an industry observer previously.

    Observers have previously stated that the tax structure has come under review because local CKD manufacturers ‘have been known’ to under-declare the foreign content levels of the vehicles produced and ‘escape with huge profits’ as a result. Another industry observer has also noted that raising car prices will benefit local makes due to their lower price points, though it will also deter foreign direct investments into the industry.

     
     
 
 
 

Latest Fuel Prices

PETROL
RON 95 RM2.05 (0.00)
RON 97 RM3.18 (-0.03)
RON 100 RM5.00
VPR RM6.11
DIESEL
EURO 5 B10 RM2.85 (-0.03)
EURO 5 B7 RM3.05 (-0.03)
Last Updated Jul 03, 2025

Latest Videos