No price increases for CKD vehicles this year

by RAHIMI YUNUS/ pic by MUHD AMIN NAHARUL

THE prices of locally assembled vehicles will not increase this year due to the restructured duties calculation as the government decided to give 100% exemption until Dec 31, 2020.

The Finance Ministry (MoF) will exempt the duties for this year and the difference in duties for past years following the implementation of new open market value (OMV) calculation for completely knocked-down (CKD) vehicles as gazetted on Dec 31, 2019, Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad (picture) said.

Aishah said the MoF officials had informed her about the decision yesterday morning and automotive companies were asked to submit the OMV based on the transparent calculation to the Royal Malaysian Customs Department immediately for models that are affected with the new formula.

She said the new ruling will be effective immediately, while further consultations will be done by the Customs and MoF with industry players during the year to determine the transparent reporting of the OMV after 2020.

She added that the MoF has given an assurance that the hike in prices of CKD vehicles, if any, would increase gradually after 2020.

“We would like to thank both the Ministry of International Trade and Industry (MITI) and MoF for exempting companies from paying the increased duties. If any increase happened after 2020, they said it will be gradual,” Aishah said in a press conference in Petaling Jaya yesterday.

The MoF has updated the OMV calculation and made it transparent that carmakers now must include new components such as marketing costs, profits and royalties into the new formula.

The move is in line with the regulations of the World Trade Organisation.

Although the excise duties, which range between 65% and 105%, are not changed, a higher OMV base would cause car manufacturers that make vehicles locally to pay more to the government and thus likely lead to higher on-theroad prices for consumers.

Aishah said there are car models which are not affected by the new methodology, while others could see the prices to increase between 15% and 20%, or up to RM33,000, based on analyses by the MAA members.

“I think had the new OMV been implemented, a lot of investors would have second thoughts 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 import cars. Why would they invest so much and yet it is not competitive?” Aishah said.

Separately, Aishah said Putrajaya is reviewing the new car pricing approval process and committed to shortening the time taken for the procedure.

The new car pricing approval is assessed by the Automotive Business Development Committee, comprises representatives from the MoF, MITI, Malaysian Investment Development Authority, Malaysia Automotive Robotics and IoT Institute, and Customs, to determine tax incentives for locally assembled vehicles.

At present, Aishah said the approval process could take up to four months for deliberation.

MAA has previously criticised the procedure, saying it had caused delays for automakers to launch new cars.