Government postpones implementing new formula for CKD models

​The government has postponed implementing a new formula on duties that will raise prices of completely-knocked-down (CKD) vehicles until next year, potentially saving car-buyers thousands of ringgit

The government has postponed implementing a new formula on duties that will raise prices of completely-knocked-down (CKD) vehicles until next year, potentially saving car-buyers thousands of ringgit.

Following news over the past two weeks that the government was mulling the idea of restructuring auto duty rates, Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad confirmed that duties of CKD vehicles will remain unchanged for 2020.

“The industry has a formula to calculate a vehicle’s open market value (OMV), which then has to be declared to customs. But on Dec 31,2019, the government gazetted a new formula that included additional factors such as marketing cost, profit and royalty. Adding these items would increase the final (on-the-road) prices of cars.

“However, I was informed this morning by the Finance Ministry (MoF) that any price increase would be fully absorbed or exempted by the MoF for this year and the difference in duties for the past years will also be exempted. This is good news!” she said at a media conference.

Aishah clarified that the new OMV formula is already in place but would only be implemented from next year.

“We were informed by the government that the increase will be gradual, ” she said, adding that the new OMV calculation would affect all ranges of models, even the national cars.

“It’s just that for national cars, the amount would be lower. Some models would be affected but the new tax structure will affect most car companies. Based on our internal calculations, the range would be from zero ringgit for cheaper cars and up to RM33,000 for the higher-end models.”

Earlier this month, StarBiz reported that locally assembled vehicles would cost more following the potential restructuring of auto duty rates by the government.

RHB Research in a report noted that a change in the duty structure arising from revisions contained in 2006 National Automotive Policy (NAP) resulted in a collapse in new car sales and it took more than 12 months for the market to recover to pre-NAP TIV sales levels.

“Non-national marques could be affected the most since national marques, in general, have lower effective excise duties from higher local content. For the initiative to be effective, the government also needs to make sure that savings from the duty reduction are passed to consumers, as opposed to distributors using it to improve margins, ” it said.

On the sales outlook for 2020, the MAA is projecting a TIV growth of less than 1% to 607,000 units.

Aishah said the government’s decision to postpone the duty increase on vehicles is unlikely to spur demand for vehicles this year.

“The persistent weak ringgit will continue to affect business confidence and consumer sentiment as well as impact car prices. We also expect a moderation in consumers’ spending in light of economic uncertainties and inflationary pressure, ” Aishah said.

She also said the NAP, which was supposed to be announced in the first quarter of 2019, is expected to be revealed this quarter.

Total vehicle sales finally exceeded 600,000 units in 2019 after failing to surpass that mark for three consecutive years, rising 1% year-on-year to hit 604,287 units.

Aishah said the growth, while small, was still a good achievement in light of the challenging environment last year.

“The increase in total industry volume (TIV) was contributed by the passenger vehicles segment which increased 3.2% or 17,080 units, ” she said. “Meanwhile, the commercial vehicle segment registered a decline of 17.4% or 11,391 units.”

She said the sub-segment that recorded the biggest market share growth was the four-wheel-drive (4WD) and sports-utility vehicle (SUV) segment, which grew to 22.6% last year from 14.2% in 2018.

“The 4WD/SUV sub-segment registered an increase of 48,962 units in 2019, ” she said.

According to MAA data, Perodua and Proton were the highest selling car companies for 2019, selling a total of 240,341 units and 100,183 units, respectively, to command a cumulative share of 56.4% of TIV.

This was followed by Honda, Toyota and Nissan with 85,418 units, 69,091 units and 21,239 units, respectively.

On Monday, Proton announced it is targeting a 30% jump in vehicle sales to 132,000 units for 2020, following a stellar performance last year. On Tuesday, Perodua said it expected flattish sales growth to 240,000 units for this year.

Source: The Star 

Posted on : 23 January 2020
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Last Updated : Thursday 21st May 2020