The Malaysian government has postponed the implementation of the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, also known as the Open Market Value (OMV) or '402' excise duty revision, which was set to take effect on December 31, 2024. The postponement averts a potential price surge in locally assembled cars (CKD) and motorcycles, providing relief to both consumers and the automotive industry.
The Malaysian automotive industry has averted a potential price crisis following a last-minute deferment of the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, commonly known as the Open Market Value (OMV) or '402' excise duty revision. This regulation, set to expire on December 31, 2024, would have significantly increased the prices of locally assembled cars (CKD) by up to 30% and motorcycles by up to 20%.
This would have had a disastrous impact on new car sales and would have disproportionately affected Malaysians in the B40 and M40 income brackets who rely on motorcycles for transportation and for work in the gig economy. The Malaysian Automotive Association (MAA), the Malaysian Automotive Manufacturers Association (MAMA), and MASAAM (Malaysian Motorcycle Industry Association) had jointly lobbied the government to reconsider the regulations, highlighting the potential economic repercussions.The controversial '402' regulation, gazetted on December 31, 2019, introduced a new methodology for calculating the open market value (OMV) of CKD vehicles. OMV is a crucial factor in determining the amount of excise duty levied on a vehicle, which directly impacts its selling price. The revised calculation included not just the production costs but also expenses related to sales, engineering, design, development, and royalty payments. This broad scope of the 'sale' clause raised concerns in the industry, as it encompassed elements beyond the traditional manufacturing costs.The planned implementation of the '402' regulations in 2020 was postponed due to the onset of the COVID-19 pandemic. However, the looming deadline continued to create uncertainty and apprehension within the automotive industry. The recent deferment provides a temporary reprieve, but the long-term implications of the '402' regulations remain a point of contention. The government needs to strike a balance between increasing tax revenue and fostering a sustainable automotive industry. Prolonged uncertainty could discourage investments, stifle innovation, and ultimately harm the Malaysian economy
AUTOMOTIVE INDUSTRY Excise DUTIES LOCAL ASSEMBLY PRICES INCREASE GOVERNMENT POLICY MALAYSIA
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