Automotive firms and patrons of domestically assembled (CKD) automobiles in Malaysia can breathe a sigh of aid because the Ministry of Finance (MoF) has agreed to delay the implementation of a revised Open Market Worth (OMV) calculation technique used to find out the excise obligation payable. This implies the dreaded value hike for CKD automobiles, which within the context of Malaysian taxation additionally contains semi-knocked down (SKD) automobiles, shall be postponed till 1 January 2026.
Nonetheless, that is solely a short lived respite, because the written reply despatched by the Ministry of Finance to the Malaysia Automotive Affiliation on Thursday, sighted by WapCar.my, explicitly states that there shall be no additional extensions.
As a recap, in 2020, the Ministry of Finance, then beneath YB Lim Guan Eng, launched a brand new excise tax regulation, P.U.(A) 402/2019 – Excise Laws (Dedication of the Worth of Domestically Manufactured Items for the Function of Imposing Excise Responsibility) 2019. This regulation expands the scope of automotive excise tax on domestically assembled automobiles to incorporate non-manufacturing prices.
Beforehand, solely manufacturing-related gadgets have been taxed. The brand new regulation will add non-manufacturing gadgets like gross sales prices, advertising and administrative bills, and revenue to the ultimate OMV.
OMV might be understood as the fee value when the automotive leaves the manufacturing facility. It is usually the worth upon which excise tax is imposed. With an extended record of things included within the OMV, the determine will naturally enhance, attracting increased tax and leading to much more inflated automotive costs.
The Malaysia Automotive Affiliation (MAA) beforehand estimated that within the worst-case situation, automotive costs might enhance by as much as 20%.
After robust pushback from producers, the implementation of P.U.(A) 402/2019 was deferred twice—first till 31 December 2022, after which once more till 31 December 2024.
As talked about earlier, the Ministry of Finance has confused that there shall be no additional extensions. The Ministry will implement the implementation of P.U.(A) 402/2019 by 1 January 2026, even when it means increased automotive costs for customers.
The Ministry of Finance is at present headed by Finance Minister YAB Dato’ Seri Anwar Ibrahim, YB Senator Datuk Seri Amir Hamzah Azizan (Minister of Finance II), and YB Puan Lim Hui Ying (Deputy Minister of Finance). The latter is the sister of the earlier Finance Minister Lim Guan Eng, who initiated the growth of taxable gadgets.
Unequal Affect Throughout Firms
The revised OMV calculation penalizes some firms greater than others, relying on how their organizations are structured.
Because the highest-value non-manufacturing value gadgets added to the OMV will come from sales- and marketing-related prices, automotive firms whose manufacturing operations are beneath a separate entity—or those who enlist third-party contract producers—shall be much less affected.
For instance, each Proton and Perodua have separate organizations for manufacturing. Proton Tanjung Malim Sdn. Bhd. (PTMSB) manufactures the automobiles, that are then offered to Proton Edar. PTMSB doesn’t incur any gross sales and advertising prices, so the influence is decrease.
Equally, Perodua Gross sales Sdn. Bhd. (PSSB) buys completed automobiles from Perodua Manufacturing Sdn. Bhd. and Perodua International Manufacturing Sdn. Bhd. (PGMSB).
Non-national manufacturers like UMW Toyota Motor additionally comply with this mannequin, buying completed automobiles from their manufacturing subsidiary, Meeting Companies Sdn. Bhd. Others, like BMW Group Malaysia, contract Inokom Company Sdn. Bhd. to deal with manufacturing.
Nonetheless, all these manufacturers besides Perodua – which pays very minimal excise tax as a result of very excessive rebates they get for the worth of native content material used within the automobiles – will nonetheless be impacted by the opposite non-manufacturing prices added.
In distinction, all-in-one organizations like Honda Malaysia and Mercedes-Benz Malaysia will face better impacts, as their gross sales, advertising, and manufacturing prices fall beneath the identical entity. These firms could have to restructure their organizations—a posh and messy course of that might contain their manufacturing principals in Japan and Germany. Authorized agreements and monetary paperwork would wish intensive revisions.
Misaligned Insurance policies
This raises the query: Why is Malaysia imposing such measures on firms which might be investing in native manufacturing and supporting native distributors?
International funding coordination businesses like MIDA and MARii are working onerous to draw automotive investments into Malaysia. One would count on the Ministry of Finance to align its insurance policies with these businesses to place Malaysia because the go-to vacation spot for automotive investments.
Mercedes-Benz Malaysia is the first German firm to construct a battery EV (BEV) within the nation. When Malaysia mentioned it needs to advertise BEVs to realize its net-zero targets, Mercedes-Benz mentioned they may help us. Within the ’80s, the Stuttgart model selected Malaysia to be the primary nation exterior of Germany to be given the honour of domestically assembling an S-Class.
As for Honda Malaysia, it’s the first to domestically assemble a hybrid automotive right here, and the primary to produce excessive voltage battery packs (Honda calls it Clever Energy Unit, IPU) in Malaysia. They did this as a result of within the late 2010s, Malaysia mentioned it wished to advertise the so-called power environment friendly automobiles (EEVs, what occurred to that now?), so Honda answered the decision.
Honda one of many largest automotive buyers in Malaysia. Due to Honda Malaysia’s contribution to growing the native vendor base, the Pegoh industrial space in Melaka can now entice Chinese language manufacturers like Haval to supply their automobiles there.
At a time when Thailand, Indonesia, and Vietnam need to pull buyers away from Malaysia to their international locations, you’d assume that Malaysia shall be good sufficient to construct on the decades-long relationship that these firms have with us.
As an alternative, the MoF seems intent on making it tougher for them to justify rising investments in Malaysia. Our already archaic excise tax construction—nonetheless based mostly on engine capability somewhat than CO2 emissions—is now much more sophisticated.
Additionally, in a splendid show of our hardworking authorities officers giving their finest at work, the choice by the MoF was communicated to automotive trade stakeholders on 19-December, as a result of doing 2025 budgeting and planning early is for the weak proper?
Additionally learn: Hybrid gross sales surge 40% in Thailand whereas Malaysia’s contradicting insurance policies stall EV transition
On the upside, the prospect of value hikes in 2026 implies that automotive gross sales in 2025 are more likely to be inflated as patrons deliver ahead their purchases. Whereas that is excellent news within the brief time period, it additionally implies that 2026’s gross sales shall be severely depressed.
Automotive firms might want to make hay whereas the solar shines in 2025 to climate the thunderstorm looming in 2026. The query is: what number of sellers will be capable to survive the storm?
