What car buyers can expect in the new year

 

Car buyers might have a good year ahead as new car brands offer competitive prices – but car prices will go up because of a new tax structure by which excise duty will indirectly increase on-the-road prices of new cars.

There might even be a shortage of new locally assembled cars, if the car makers’ submissions of the new tax returns are not processed in time for the Chinese New Year car sales peak next month.

Above all, there is the strong probability that the current bloodbath in the local car assembly industry will continue into 2025 with legacy car makers losing market share and revenue to new car companies.

There probably will be a push-back from the Malaysian Automotive Association about the controversial new tax structure for calculating the excise duty. But there might be too little time for the newly appointed MAA chief operating officer to do anything about it.

Excise duty is an indirect tax on locally-assembled products, which is collected from the car buyer by the car seller. In the context of the automotive industry, the rate of excise duty is reduced in inverse proportion to local content – the larger the value of local content, then the lower the excise duty.

Although announced years ago, this new tax structure was not implemented. However, some local assemblers confirmed receiving notice early this month that the exemption would not be extended any further.

The irony is that the new car brands in Malaysia have not invested on the scale that legacy brands have over the years and they won’t have to pay this excise duty because most of them are selling either fully imported cars and/or cars which are assembled from semi-knock-down kits.

Most of these new car brands have tax exempt status: electric vehicles are fully exempt from import duty and excise tax until 2026. As for combustion engine cars, it looks like they are also tax exempt for the period it takes them to build up their assembly plants.

For the legacy automakers, it looks like next year will be a horrible business cycle where their locally assembled cars will be taxed more and cost more to car buyers. And the encroachment into their market share will accelerate because the new car brands will thoroughly take advantage of their tax-exempt status.

Don’t worry, though, if you’re buying a Perodua or a Proton. Perodua qualifies for full excise duty exemption in compliance with the policy to encourage content localisation. Proton is a joint venture with Geely and qualifies as a manufacturer because it stamps the body for the Saga and the Persona.

Both these car companies are committed to introducing locally assembled EVs within the next two years.

It can’t be that the government wants to add to the burden of Malaysians who are already paying very high taxes on new cars.

On the other hand, it could very well be the work of a harassed bureaucrat in the finance ministry who has been tasked to find more revenue for the government but who doesn’t realise the consequences to Malaysia’s car buyers as well as the local assemblers.

Perhaps it’s best to review the car tax structure so that there’s an equilibrium between tax revenue and tax burden as well as rewarding buyers of PHEVs and range-extenders that are part of the energy transition journey towards zero-emission cars.

Would you support a structure like a carbon-tax where the tax burden is lowest on zero-emission EVs and progressively higher for plug-in hybrids, range-extender hybrids, hybrids and so on?

Yamin Vong can be reached at his Facebook page, yamin.com.my. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.