Thursday the 28th of February 2013 has been an interesting day for the automotive industry in Malaysia. Hot news in all the newspapers and online portals have been on the gradual reduction of car prices in the coming years. We have heard this story many times before and it has been of little effect in the final selling price for many cars that Malaysians desire.
The media has released some confusing reports for car consumers. General reports have stated the reduction of car prices. Let’s look more closely at this. For the auto industry there are 3 components of taxation, import duty, excise duty and sales tax.
We all know without a doubt that there is a huge multiply effect on the economy. As such, careful and much thought must be given whenever there is a need for any changes to the end selling prices of any car. Any revision to policy for the automotive industry on reducing prices of cars has to be done carefully and in phases as this involves the entire eco-system of the auto industry. Discussion on the issue of excise duty for car with the Treasury is still in progress stage as it involves a lot of revenue for the government which in turn is to be used for the population in various sectors. For this, the Treasury department and not MITI is the custodian as it is revenue matter.
The total employment in the automotive industry is more than 350,000 currently and growing. Daihatsu Motors is nearing its opening of its all new manufacturing plant and this alone will give jobs to a lot of Malaysians as its will be a regional plant. Looking at this and more, any policy changes must be done carefully as it could affect the livelihoods of many Malaysians directly and indirectly.
A key factor leading to a reduction in car prices is the liberalization of the automotive industry. The Government is looking at a gradual reduction in car prices in line with AFTA and Free Trade Agreements signed such as with Australia (MAFTA) and Japan (MAJEPA).
MITI (Ministry of international trade and industry) says that the import duty for cars imported from Australia and Japan would be phased out gradually by 2016. This is strange as we do not recall having any Holden’s (Australian made car) being sold here since its departure in the 1970s. There are no other Australian made cars sold here to our knowledge.
For Japanese imported cars, there are some exotics like Lexus, Infiniti, high end Nissans and Toyotas, but this only benefits the rich and not the average car consumer. What about European cars. Why no reduction in their duties?
More European brands are becoming popular and are set to outsell some Japanese brands in coming years.
MITI adds that, under AFTA which has been enforced since 2010, there is no import duty imposed on CBU imported from ASEAN member countries. As a result, importation of CBUs has been increasing from 25,515 units in 2007 (accounting for 5.2% of TIV) to 86,588 units (accounting for 13.8% of TIV) in 2012. As a result of the liberalization of the automotive industry, it is incumbent upon the local OEMs to reduce prices in order to remain competitive. Prices of cars have been reduced ranging from RM2200 to RM17000 depending on models since last year. Further reduction in prices would be realised with the liberalization of the industry following the implementation of the FTAs. National makes (Proton and Perodua) are making efforts to increase production capacity and exports, and to reduce cost.
There was no announcement on the revised National Automotive Policy (NAP) and also no announcement on the excise duty reduction. So how does this really benefit the AVERAGE Malaysian car consumer? Will this reduce our fuel subsidies and the price of fuel move upwards to offset the loss in car tax revenue? Will our income be taxed more?
