Bear in mind the open market worth (OMV) excise obligation revision quandary that crops up yearly finish, threatening value hikes for CKD regionally assembled vehicles and bikes if the federal government doesn’t give one more deferment? We’re right here once more, within the remaining month of 2025 and with no replace in sight. The deferment expires in January 2026.
At yesterday’s launch of the Mercedes-Benz GLC 200, we requested Mercedes-Benz Malaysia (MBM) if costs of their CKD vehicles will shoot up come January 1, 2026, and so they flatly stated that they don’t have any updates on the matter.
“We’re anxiously ready for it. As soon as we’ve the affirmation, we’ll share it. You’ll see it (value change) from January 1 if there was any communications. For now, what you see is what you’ll get,” Nadzir bin Ab Razak, MBM’s head of product administration and planning stated. By the best way, the corporate has ready a brand new value checklist based mostly on modifications to the OMV coverage, as they’ve achieved for a couple of years now.
MBM is among the many OEMs which have native meeting operations in Malaysia, and if they’re nonetheless at nighttime, we are able to assume that different carmakers too are but to listen to from the federal government about one other deferment, or higher but, a everlasting resolution to keep away from a déjà vu each December.
When saying that the auto trade secured a one-year deferment for 2025, Malaysian Automotive Affiliation (MAA) president Mohd Shamsor Mohd Zain stated in January that the impact of OMV/402 will likely be an common value enhance of between 10% to 30% for CKD vehicles, which might result in decrease gross sales and quantity, affecting carmakers and suppliers negatively.
“We’re very involved. Primarily based on our understanding proper now the 402 will likely be carried out by January 2026. If that actually occurs, there will likely be a median value enhance of between 10% to 30% for CKD vehicles.
“If that (OMV revision) occurs, there will likely be a whole lot of spiral down results for the long run years, by way of decrease gross sales, decrease quantity, particularly for CKDs. It’ll additionally have an effect on our native trade, particularly our suppliers. There’s a whole lot of after results that we’re involved about,” Shamsor stated then, earlier than Malaysia Automotive Element Components Producers (MACPMA) and Motorbike and Scooter Assemblers and Distributors Affiliation of Malaysia (MASAAM) weighed in.
What’s this OMV/402 situation all about once more? Right here’s an explainer on the bullet we’ve been dodging for years, and the way we received right here. The controversial ‘402’ – gazetted on the final day of 2019 – stipulated a brand new methodology of calculating a CKD automobile’s OMV, which influences how a lot tax is to be paid and subsequently, its promoting value. OMV is outlined as the ultimate market worth of a CKD automobile ex-factory, earlier than the federal government imposes excise duties on it.
It’s primarily made up of the price of the CKD pack, price of producing and elements in addition to meeting and administration prices. Observe that fully-imported (CBU) automobiles use a distinct system – costs for these are based mostly on Value, Insurance coverage and Freight (CIF), on which import and excise duties are imposed.
The PH-era rules set that in calculating OMV, one should have in mind not simply the revenue and common bills incurred or accounted within the manufacture of a automobile, but in addition of its sale. It was this ‘sale’ clause that received trade gamers up in arms, as a result of it concerned areas reminiscent of engineering, growth work, artwork work, design work, plan and sketch, royalty funds and license charges (patent, trademark, copyright). Consider it as ‘manufacturing unit prices’ plus ‘workplace prices’.
The rules have been supposed to come back into power in 2020, however 22 days into that pandemic 12 months, MAA introduced that the finance ministry had deferred implementation to 2021. By end-2020, it was deferred once more, and MAA appealed to the federal government in 2022 for continued deferment, which was profitable – a two-year deferment was granted, till December 31, 2024. The most recent deferment is till December 31, 2025.
As you’ll be able to think about, this uncertainty isn’t good for a corporation’s planning, forecasting and operations. With out readability, investments can even be hampered – nobody needs to put money into native manufacturing and ‘dwell on the sting’ each December hoping for the very best. No exaggeration right here – the second deferment was introduced simply two days earlier than 2021 ended!
If costs of CKD vehicles do go up by as a lot as 30%, maybe OEMs is not going to trouble with the effort of native manufacturing and simply herald CBU imports – this may be a loss for the trade and nation. Sure, the federal government would acquire extra taxes with the revised OMV within the quick time period, but when increased costs harm gross sales quantity (all-time excessive in 2024, we’ve momentum), manufacturing and ultimately job alternatives for the rakyat, it could possibly be an instance of being penny-wise however pound-foolish.
Maybe the following administrations after Pakatan Harapan do see the logic behind the auto trade’s argument, therefore the fixed stays of execution, however kicking the can down the highway by way of annual deferments certainly isn’t the best way to go.
Earlier this 12 months, the finance ministry stated that “MoF, along with MITI and the automotive trade, is at the moment reviewing the automobile valuation methodology to make sure that the imposition of tax is carried out in a good, impartial and constant method”. Fingers crossed, once more.
We additionally requested MBM president and CEO Amanda Zhang for updates on Malaysia’s transfer away from ‘Customised Incentives’ to a set and fairer incentive system for the automotive trade. It was purported to have occurred in October, and MITI stated in September that it was finalising the New Customised Incentive Mechanism.
It’s nonetheless within the works. “I’m really very a lot concerned with a whole lot of the discussions with the ministries. Proper now, we’re within the means of negotiating a free commerce settlement between the EU (European Union) and Malaysia, so there are a whole lot of discussions taking place,” Zhang stated.
“We enter this market, we’ve to just accept additionally the arrange as it’s. Within the present system, a whole lot of the incentives are achieved based mostly on particular person foyer, and I feel the Malaysian authorities has additionally realised, and are going ahead with better transparency. So, I can not say honest or unfair because it is dependent upon every OEM’s contribution to the nation.
“However going ahead, we all know that the insurance policies will deliver extra transparency to the floor, so it actually is dependent upon our funding within the nation to come back to the respective incentives that we are able to get,” she added.
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