The impending implementation of revised excise duty regulations for locally-assembled (CKD) vehicles in Malaysia is expected to lead to a significant price increase for these cars, ranging from 8% to 20% by 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. 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. 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 a two-year deferment was granted. 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 their cars in the near future. A lot can happen in 12 days, though
CKD Cars Excise Duty Malaysia Price Increase Automotive Industry
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