Sime Darby is likely to hear the “everything going up except salary” complaint soon
In Budget 2024, the new government announced a 2 percent service tax increase from 6 percent to 8 percent effective 1 March 2024. Exemptions include services for food and beverage, telecommunications, vehicle parking and logistics, but we can expect to see the tax hike in areas such as vehicle servicing, which has labour charges and the like.
It may be just a service tax increase and not an overall sales and service tax (SST) hike, but it is very likely that car prices might go up as well, in tandem with the overall cost of doing business. At least that’s the case for the Sime Darby Group, as reported by The Edge. If this is true, then many potential buyers may just change their minds.
Moreover, according to group CEO Datuk Jeffri Salim Davidson, Sime Darby, whose motors division is a distributor and/or dealer of brands such as BMW, BYD, Ford, Hyundai, Jaguar, Land Rover, MINI, Volvo and Porsche, is expected to increase car prices in Malaysia. Sime Darby also recently became the majority shareholder of UMW Toyota Motor (Toyota and Lexus) and Perodua via a takeover of UMW.
According to the report, Jeffri said Sime Darby will treat the tax rate increase, which will be applicable to all other automotive players as well, as part of its cost of doing business. However, the increase won’t be a flat 2 percent as there are many factors involved. No doubt, making more profit is chief among these factors but that’s just business.
“In theory, yes [car prices will increase]. But the car price is set depending on competition, so it won’t exactly be 2%. And then we have other factors that come into play. So, it’s difficult to say exactly that car prices will go up by 2%.” He told the media on Wednesday. We will likely see a higher percentage to keep up with inflation and competition too.
On top of that, this is an example of prices indirectly affected by a seemingly unrelated tax, as the overall cost of doing business increases and companies seek to maintain their margins. Well, this is nothing new in business but it does mean that the majority of prospective owners looking at cars under the Sime Darby umbrella will now be forced to look at cheaper alternatives.
What do you guys think? Is this tax hike going to affect more automakers like Sime Darby and if so, which ones?
