MAA: Prices of CKD cars to increase after 2022 unless MoF clarifies OMV adjustment

Prices of locally-assembled (CKD) cars in Malaysia will increase by between 8 to 20 percent unless the Ministry of Finance clarifies on what is the status of the revised Open Market Value (OMV) that is currently on hold until 31-December 2022, said Datuk Aishah Ahmad, President of the Malaysia Automotive Association (MAA).

In January 2020, the then Minister of Finance Lim Guan Eng had approved a revision in OMV calculation for CKD cars, presumably in a bid to increase the government’s tax revenue.

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OMV is basically the cost price that a local distributor pays for the car. For locally-assembled (CKD) cars, OMV refers to the wholesale price the distributor / national sales company pays to the car’s manufacturing plant / contract manufacturing company / manufacturing subsidiary.

OMV is generally calculated as the total cost of materials and manpower used to manufacture the car, plus freight and insurance charges to transport the completed car to the showroom.

This is also the value that the Malaysian Customs will use when calculating the value of excise and import (where applicable) tax payable. 

In the past, non-manufacturing services like marketing cost, staff salaries, royalty payments – are not included.

The new OMV calculation however, includes those and according to MAA’s own estimates, will result in increase in prices of CKD models by between 8 to 20 percent.

Also read: MAA: New government reviewing new OMV calculations

Technically, this new OMV is still enforced but the government had in December 2020, temporarily suspended it by offering rebates of equal amount to local manufacturers – effectively cancelling increase in prices caused by the new OMV.

However, this temporary suspension will expire by 31-December 2022 and to date, the Ministry of Finance has yet to clarify on the next step.

On its part, MAA is appealing to have the new OMV permanently cancelled, and for the government to revert back to the previous calculation method.

Also read: No further increase in 2021 car prices, government suspends plan to revise OMV

“The issue that we face right now, is that the government had in 2020 changed the OMV calculation to include non-manufacturing cost items to be included when calculating excise duties. If that happens, car prices on the road will increase from 8 to 20 percent.

“We have written to the government to appeal because they have given us the exemption until the end of 2022. We have appealed to say to the government, ‘Please let us know whether will this be extended or not’ because this is very important to the industry.

“If it is not extended, it means that all (CKD) car prices will go up by next year,” said Datuk Aishah at today’s Annual General Meeting of MAA.