Denies Price Hike: Latest Updates and Analysis

Gov’t denies up to 30% price hike for CKD cars, bikes in 2026 – OMV/402 excise revision still being reviewed

The government has responded to the open market value (OMV) excise duty revision quandary that has the local car and motorcycle industry up in arms. The finance ministry (MoF), together with the ministry of investment, trade and industry (MITI), mentioned that reports of CKD locally assembled car/bike prices going up by up to 30% in 2026 are inaccurate.

On the annual deferment of implementation of excise tax regulations under PU(A) 402/2019-Excise Tax Regulations (Determination of Value of Locally Produced Goods for Excise Tax Purposes (latest round pushes it to January 2026), MoF says that it is reviewing the vehicle valuation method for it to be fair, neutral and consistent.

“There has yet to be a final decision. MoF, together with MITI and the automotive industry, is currently reviewing the vehicle valuation method to ensure that the imposition of tax is carried out in a fair, neutral and consistent manner,” it stated in a brief statement yesterday.

When disclosing that the auto industry secured a one-year deferment last month, Malaysian Automotive Association (MAA) president Mohd Shamsor Mohd Zain noted that the effect of OMV/402 will be an average price increase of between 10% to 30% for CKD cars, which would lead to lower sales and volume, affecting carmakers and suppliers negatively.

“We are very concerned. Based on our understanding right now the 402 will be implemented by January 2026. If that really happens, there will be an average price increase of between 10% to 30% for CKD cars,” he expressed.

“If that (OMV revision) happens, there will be a lot of spiral down effects for the future years, in terms of lower sales, lower volume, especially for CKDs. It will also have an impact on our local industry, especially our suppliers. There’s a lot of after effects that we’re concerned about,” Mohd Shamsor added.

The Malaysia Automotive Component Parts Manufacturers (MACPMA) weighed in, with its president Chin Jit Sin telling [website] that the auto industry contributes to more than 4% of Malaysia GDP and provides employment to over 200,000 people. Lower volume could cause plant closures and job losses.

“Motor vehicle manufacturers will stop making new investments immediately to produce new models of motor vehicles in Malaysia, and just bring in CBUs from other ASEAN or RCEP countries, since there is less difference in the cost of CBU versus CKD vehicles,” he expressed.

It’s not just cars that will be affected. Hoo Wan Tim, president of Motorcycle and Scooter Assemblers and Distributors Association of Malaysia (MASAAM), told [website] that prices for CKD bikes would go up by up to 20%, impacting Malaysians in the B40 and M40 income brackets.

“MASAAM would also like for the government to relook into the OMV/402 situation to avoid a significant cost impact to the livelihoods of consumers. Especially so that when it comes to motorcycles, our consumers are mostly in the B40 and M40 groups that will be even more severely impacted. For those in the need of basic transportation, including those in the gig economy (delivery riders), that will be a massive increase,” he unveiled.

It’s a view shared by the Malaysian Motorcycle and Scooter Dealers Association (MMSDA), who noted that dealers would have to pass down the price hike to buyers. He told us that the impact would affect smaller capacity locally assembled motorcycles the most. “Most buyers of kapcai or motorcycles below 150 cc belong to the B40 income group, who rely on these motorcycles as their main means of livelihood. A price increase would undoubtedly add to their financial burden,” he noted.

Here’s an explanation of the bullet we just dodged, and how we got here. The controversial ‘402’ – gazetted on the last day of 2019 – stipulated a new methodology of calculating a CKD vehicle’s OMV, which influences how much tax is to be paid and therefore, its selling price. OMV is defined as the final market value of a CKD vehicle ex-factory, before the government imposes excise duties on it.

It’s primarily made up of the cost of the CKD pack, cost of manufacturing and components as well as assembly and administration charges. Note that fully-imported (CBU) vehicles use a different system – prices for these are based on Cost, Insurance and Freight (CIF), on which import and excise duties are imposed.

The PH-era regulations set that in calculating OMV, one must take into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale. It was this ‘sale’ clause that got industry players up in arms, because it involved areas such as engineering, development work, art work, design work, plan and sketch, royalty payments and license fees (patent, trademark, copyright). Think of it as ‘factory costs’ plus ‘office costs’.

The regulations were supposed to come into force in 2020, but 22 days into that pandemic year, MAA unveiled that the finance ministry had deferred implementation to 2021. By end-2020, it was deferred again, and MAA appealed to the government in 2022 for continued deferment, which was successful – a two-year deferment was granted, until December 31, 2024. The latest deferment is until December 31, 2025.

While carmakers and consumers can breathe a sigh of relief for now, this uncertainty isn’t good for a business’s planning, forecasting and operations. Without clarity, investments will also be hampered – no one wants to invest in local production and ‘live on the edge’ every December hoping for the best. No exaggeration here – the second deferment was showcased just two days before 2021 ended!

If prices of CKD cars do go up by as much as 30%, perhaps OEMs will not bother with the hassle of local production and just bring in CBU imports – this would be a loss for the industry and country. Yes, the government would collect more taxes with the revised OMV in the short term, but if higher prices damage sales volume (all-time high in 2024, we have momentum), production and eventually job opportunities for the rakyat, it could be an example of being penny-wise but pound-foolish.

Perhaps the subsequent administrations after Pakatan Harapan do see the logic behind the auto industry’s argument, hence the constant stays of execution, but kicking the can down the road via annual deferments surely isn’t the way to go.

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MoT clarifies new vehicle inspection appointments – chosen based on financial stability, not age/experience

The ministry of transport’s (MoT) appointment of three new non-Puspakom vehicle inspection companies on Friday led to lots of speculation on why those specific firms – which apparently had either only been not long ago incorporated or had no experience in vehicle inspections – were awarded contracts. The expressed ministry has now come out to explain its selection process, insisting that it was based on financial stability.

As previously reported, 12 companies sent proposals for becoming motor vehicle inspection service (PPKM) suppliers before the October 31 deadline. All applications were evaluated .8 – Procurement Procedures through Requests for Proposals (RFP) that has been in effect since November 29, 2022, MoT expressed.

It added that the selection of companies were based on the guidelines set under the Road Transport Act 1987 (Act 333), including eligibility requirements, procedures, regulations and standards that can be found on the MoT and road transport department’s (JPJ) websites since April 23.

Among the main requirements for the companies entering the RFP process included being registered and licensed with the companies commission of Malaysia (SSM) and local authorities, having a minimum paid-up capital of RM10 million throughout the length of service, and having a minimum working capital of RM5 million per year.

They must also obtain a standards compliance certificate from the standards department within two years of the offer date, provide a minimum five per cent deposit or bond from their working capital, obtain an approved facility certificate from the environmental department before licensing, and be registered as a member of the International Motor Vehicle Inspection Committee (CITA) within two years of the date of licensing.

Their shareholders, owners and board of directors also cannot have any pending court proceedings or actions or be blacklisted by any authorities. The evaluation and licensing committee found that the three selected companies – Wawasan Bintang, Pakatan Petroleum and Beriman Gold – fully met the stated criteria.

The ministry stated that neither it nor JPJ set the period of the companies being registered with SSM as a requirement, instead giving priority to their financial stability based on their ability to provide sufficient paid-up capital and working capital.

It added that since 1994, Puspakom had hitherto been the only business mandated to conduct vehicle inspections under the Road Transport Act 1987. As such, no other companies could have had the experience in carrying out Puspakom’s functions before.

As for the locations of the service providers, MoT mentioned it determined those based on a “cross subsidy” concept, whereby companies were delegated both low- and high-capacity areas. This prevents any business from only choosing locations with high volume and ensures all consumers nationwide get access to vehicle inspection services. It also stressed that the locations were distributed to the companies by MoT and JPJ; they were not selected by the companies themselves.

The ministry reiterated that the offer letters awarded to the selected companies on Friday were conditional approvals. This requires each firm to ready the necessary infrastructure, equipment, manpower and other requirements within 24 months (two years) before the MoT and JPJ will even issue operating licenses.

As such, the government will not be financially burdened by this approach, it revealed; it will not grant the operating licence if the companies fail to meet the conditions within the specified period. The procurement process, MoT added, was carried out based on the procurement and financial procedures in force to ensure quality, transparent, and competitive vehicle inspection services for the benefit of the rakyat.

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Wawasan Bintang, Pakatan Petroleum, Beriman Gold – who are these new alternatives to Puspakom?

Last Friday, the transport ministry (MoT) unveiled the appointment of three new motor vehicle inspection services (PPKM) besides Puspakom. Transport minister Anthony Loke mentioned that these appointments were made in line with the results of a cabinet meeting on March 17, 2023, in which it was agreed that vehicle inspections, mandated as part of the Road Transport Act 1987 (Act 333), would be opened up to other eligible companies.

The three companies approved by the MoT and the road transport department (JPJ) are Wawasan Bintang in Port Klang, Gua Musang in Kelantan and Mersing in Johor; Pakatan Petroleum in Rawang and Temerloh in Pahang; and Beriman Gold in Kuching and Serian in Sarawak. , the approvals were given after conducting a “strict” evaluation process.

Following the appointments, a PAS member has asked the transport ministry to explain the process on how these three companies were chosen. In a post on Facebook, Nurul Islam Mohammed Yusoff expressed that while he supported the government’s move to break Puspakom’s monopoly in the segment, he questioned the backgrounds of the companies appointed.

He asked how the ministry could appoint new companies without relevant experience to carry out vehicle inspections, given that it involves the lives and safety of road clients. He mentioned that based on SSM records, Pakatan Petroleum and Beriman Gold were involved in businesses that were not related to the automotive sector.

He stated that his searches revealed that Pakatan Petroleum was involved in “trading petroleum, gas, and related business,” while Beriman Gold has a nature of business outside the automotive domain, namely in construction, telecommunications and IT.

While Wawasan Bintang listed its business as being that of providing services in inspection of motor vehicles, Nurul Islam stated that the organization is only eight months old and as such, has no proven track record. He also asked how a organization that has not yet filed a financial statement and audit investigation prove that it has solid financial values.

As Loke pointed out during the announcement, the approved firms were selected based on several main criteria, including being locally owned, having a strong financial standing and having a minimum paid-up capital of RM10 million. They were also required to show that they had high potential, readiness and commitment to ensure that the conditional approval granted would be fully utilised.

The three companies that received the PPKM approval offer have 24 months to complete their infrastructure requirements, including the development of premises, the procurement of inspection equipment and obtaining approval from the relevant authorities.

The ministry presented it will observe the process throughout to ensure all conditions and operating standards are met and will only grant an operating licence once all requirements are met and the firm is ready to commence operations.

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