KUALA LUMPUR: There will be no increase of on-the-road (OTR) prices of locally assembled vehicles this year as the government decided to give 100 per cent duty exemption until December 31, 2020.
Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said the decision by the Finance Ministry is in reference to models affected by the restructured duties, following the open market value (OMV) calculation method for completely knocked-down (CKD) vehicles, gazetted on December 31, last year.
“The Finance Minister will maintain duty exemption for this year and the difference in duties for past years will also be exempted,” she said at a press conference after presenting market review for 2019 and outlook for 2020, here yesterday.
She said the decision would be ‘effective immediately’, adding that automotive companies had been asked to submit the OMV based on the transparent calculation to the Royal Malaysian Customs Department (Customs) immediately for models affected by this new methodology.
“Further consultations will be done by the Customs and Ministry of Finance with the industry players during the year to determine the transparent reporting of the OMV after 2020,” she added.
Aishah said the deferment (OMV new calculation) has yet to be ascertained whether it will be continued after the one-year exemption period.
“However, car prices may have a gradual increase due to OMV calculation, starting January 1, 2021,” she said, adding that the new calculation was made more transparent in line with the World Trade Organisation’s regulation.
Under the new OMV calculation, car manufacturers should include their marketing costs, profits and royalties into the new methodology.
Aishah said currently excise duties imposed on CKD vehicles ranging from 65 per cent to 105 per cent remain unchanged.
Although some car models would not be affected by the new calculation, Aishah said CKD vehicle prices likely to increase between 15 per cent and 20 per cent or up to RM33,000, based on MAA’s members analyses.
Aishah said the new OMV calculation may shun CKD assemblers from investing further locally due to competitiveness issue (tax structure).
“I think if the new OMV was implemented, a lot of investors would have a second thought about investing in Malaysia.
“Even local car companies that have been heavily investing in CKD operations have to think again and maybe they would decide to bring imported units,” she said.
Meanwhile, Aishah said the government is reassessing the new car pricing approval process to shorten the procedure.
This allows the government via the Automotive Business Development Committee (ABCD) to deliberate the tax incentives for new CKD vehicles.
ABCD comprises representatives from International Trade and Industry Ministry, Finance Ministry, Malaysia Automotive Robotics and IoT Institute, Malaysian Investment Development Authority and the Customs.
She said the approval process usually requires about four months in determining the final prices before new CKD vehicles can be launched.
“Car makers seek incentive via the Industrial Adjustment Fund from the government to assemble vehicles locally,” she said.
The approval process is vital for the government to thoroughly evaluate the local content of the assembled cars before announcing the new prices.