Should there be no further action to postpone this further, the revision of the Open Market Value (OMV) excise duties, or the PU(A) 402/2019-Excise Tax Regulation (Determination of the Value of Locally Produced Goods for Excise Purposes), will finally be implemented in January 2026.
As previously reported, its introduction will impact the pricing of locally assembled CKD cars and motorcycles. Published on the last day of 2019, the ‘402’ establishes a new methodology for calculating the OMV of a CKD vehicle, which affects the amount of tax to be paid and therefore the sales price.
The OMV is defined as the final market value of a CKD vehicle ex-factory, before the government imposes duties on it, and consists mainly of the cost of the CKD package, production and parts costs, as well as assembly and administration costs.
The revision aims to introduce additional calculations to the equation, expanding excise duties to include non-production costs, such as the sales aspect of a vehicle, but also related elements such as marketing, administrative costs and profit. Doing so will obviously increase the price of a CKD vehicle.
Of course, the effects of OMV/402 have never been felt, as it has been delayed since its initial publication. The regulations were scheduled to come into effect in 2020, but 22 days into that pandemic year, MAA announced that the Ministry of Finance had postponed implementation until 2021. In late 2020, implementation was postponed again, and MAA appealed to the government in 2022 for continued postponement, which was successful, granting a two-year postponement until December 31, 2024.
The latest postponement is until December 31st of this year, but that seems to be it as it looks like it’s being implemented. As of last month, the government’s indication was that the plan was still on track, but there has still been no update on the matter.
With just a few weeks to go before the year ends, the question is: will everything be on tape on time, or will there be an extension? At this time, it appears that its introduction is still planned, said Mohd Shamsor Mohd Zain, chairman of the Malaysian Automotive Association (MAA).
To reiterate what he said in July, the OMV/402 will be implemented as planned, but will include a new methodology that will minimize its impact. “The government is still finalizing the mechanism and has indicated that there will be very little or no impact on pricing,” he said. paultan.org in response to a question about this.
The latter is relevant as there were fears that prices would rise following the excise duty review, with the industry’s initial suggestion being a possible 10% to 30% increase in CKD prices. However, the Ministry of Finance denied in February that this was the case.
This was echoed last month by Deputy Finance Minister Lim Hui Ying, when she said the country was identifying ways to curb potential car price increases once the new regulations come into effect, saying that “the government will take mitigation measures to minimize the impact on the public.”
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When asked how minimal the effect on pricing will be, Shamsor answers that nothing has been indicated yet. “That’s what they do, make calculations and finalize things, and that’s what we’re waiting for,” he said.
As for whether the revision will have a negative impact on CKD production, Shamsor believes there will be very little impact, as well as on sales. “The government has promoted local production and is also always looking for local investment, so they are not going to create something that will hinder the business,” he said.
Meanwhile, Malaysia’s planned switch from ‘customized incentives’ to a fixed and fairer New Customized Incentive Mechanism (NCM), which was supposed to happen in October, is still on the schedule. “According to the information we have received, this will happen soon, but we do not have an exact date yet,” he said. Hopefully the answers to all these questions will come soon.
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