Car buyers are making 5 bookings for the same car, more robust criteria for SST-exempted cars needed

Due to the ongoing supply chain disruption that is affecting the global automotive industry, the waiting period for many new cars are now averaging between 4 to 6 months. In response, it is not uncommon for car buyers to place up to 5 bookings for the same car, with 5 different dealers, just to pit one dealer against another on who can deliver their car faster.

Yesterday’s announcement by the Ministry of Finance to extend the grace period to register SST-exempted / -deducted passenger cars until 31-March 2023 (but cut-off date for SST exemption / deduction remain unchanged, at 30-June 2022) is a good news for those who are still waiting for their new cars. However the lack of a robust qualifying criteria also means that the longer grace period is now open to even more abuse.

Currently, the only qualifying criteria to enjoy the longer grace period to register a SST-exempted / deducted passenger car is that the vehicle must be booked on or before 30-June 2022.  

But placing a booking hardly takes any effort. It’s just a matter of paying several hundred Ringgit, and the buyer can always ask for a refund if he / she wants to cancel the booking.

Also read: Why can’t my dealer tell me when I can get my new car?

In normal times, it is not a big deal for dealers to give refunds for booking cancellations. But we are not living in normal times, not since the 1990s has anyone waited 3 to 4 months for a Proton Saga.

In the coming months, are dealers expected to keep giving refunds for cancelled orders?

Also, even among serious buyers, it is very common (and within the buyer’s right) to change his / her booking to another variant or colour. What happens if the buyer changes his / her booking after 30-June 2022? Will they still qualify for the SST deducted or exempted price?

For now, nobody can give a clear answer. Checks with several leading car companies reveal that many are still seeking clarification from the government.

In principle, a buyer cannot be taken seriously until he / she is prepared to pay the 10 percent deposit and submits application for a car loan (hire purchase), that or pay up balance in cash. Short of that, the buyer is very likely to be someone who is trying his luck by making multiple orders with different dealers, probably even with dealers from different brands. 

But going down this route will lead us into another problem - when a bank approves a loan application, that offer is valid for only 3 months. If the vehicle is not registered within 3 months, the loan offer is no longer valid, but the average waiting period for many popular new cars these days is more than 3 months.

The Ministry of Finance says there are 264,000 outstanding bookings for new cars, but as we have explained earlier, it’s hard to know how many of this are double- or triple-booked cars.

Depending on the manufacturers dealer management system / back-end, it is possible to weed out customers who are placing multiple bookings, but they can’t stop a customer from doing so.

A customer has every right to place as many bookings, with as many dealers as they want, and it is the manufacturer’s responsibility to solve the supply chain issue, which is the root cause to this mess that we are in.

Yes, we fully understand that supply chain issue is geo-political one, involving China, Ukraine, and Russia, as well as congestion at shipping ports post-pandemic, but the customer doesn’t care about this.

Customers just want their cars fast. They cannot understand why they are being made to wait as if their Proton, Perodua, Toyota, or Honda are handbuilt supercars, with panels beaten into shape by an artist’s hand, and leather stitched by some quirky craftsmen who will only work as and when he / she likes.

There is no simple solution to this, and Ministry officials have probably given this a thought and concluded that enforcing tighter controls to qualify for SST exemption / cuts will just make things unnecessarily complicated, and they probably don’t have the resources to track or audit.

So, the Ministry of Finance just left it at that – if the car is booked on or before 30-June 2022, and is a passenger car, it qualifies. If it’s a locally-assembled (CKD) passenger car, it gets full exemption from the 10 percent sales tax. If it’s an imported (CBU) one, it only pays half the normal sales tax rate.

As far as the government is concerned, it has done its part, granting some concessions to manufacturers by meeting their requests at a halfway mark. What happens next is something that the manufacturers will have to figure out on their own.

The counterpoint to that is of course – why must it be so messy, why weren’t things better thought through? Must the Ministry wait until 10 days before the cut-off date to make an announcement?

Meanwhile, car dealers are just too busy collecting last-minute orders. “As for invoicing, we follow the proverbial phrase – only decide on when to cross the bridge once you get to the bridge. Right now, we are just too busy collecting orders,” said one dealer we spoke to.