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So, Are Cars Really Cheaper Now?

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The most sensational local news this week would be the press conference made by the Minister of International Trade and Industry, Dato’ Seri Mustapa Mohammed on the reduction of import duty imposed on new vehicles from Japan and Australia this year, and gradually will be reduced to naught in the year 2016. This is the realization of Free Trade Agreements (FTA) signed with the 2 countries. Mustapa said the current new car import duties from Japan and Australia stand at 15% and 13.6% respectively. But what does it mean for you and I? Will we see a reduction on car prices? ‘Fraid not, depending on what car you buy. Here’s why…

We know that tax structure of every new car sold consist of 3 elements; import duty, excise duty and sales tax. The sales tax is standard at 10% across the range, but the largest chunk is the excise duty, which, according to Rafizi Ramli, an opposition politician, “starts from 85% for a 1,800 cc car and exceeding 115% for high end makes of 3,000 cc cars and are imposed on all cars regardless of where they are built.” An excise duty is an extra charge imposed by a government on use of certain products, which is conventionally levied to discourage people from buying certain goods. The import duty of 15% and 13.6% is a paltry sum compared to the excise duty. There is also the franchise AP cost, which starts from RM 10,000. Secondly, most of the cars on sale, say, RM 150,000 and below are either assembled in Malaysia or imported from Thailand, which effectively, have import duty ranging from 0 to 5%, thanks to the Asean Free Trade Agreement (AFTA). These cars normally constitute the majority of cars sold in Malaysia, and they are not obviously not impacted by the reduction of import duty. The Malaysian Insider reported that only 3.5% of the TIV are probably affected by this reduction of import duty, or 21,000 units a year. Unfortunately, grey importers do not benefit from this reduction too, as they are only for brand new cars originating from Japan and Australia. Perhaps, only some Suzuki models, Subaru, Toyota Prius and Prius C, Honda Insight and CRZ, some Mazda models, Lexus and Infiniti would see reduction in their prices. 2013-holden-commodore-vf-front-action-600-001 Finally, how many of the new cars we see on the road today are from Australia? The answer is zilch. As much as we would love to see HSV (Holden Special Vehicles) or FPV (Ford Performance Vehicles) with their supercharged V8s plowing through the streets of KL, the Malaysian road tax structure would literally kill them off before they can reach our shores. FPV-falcon1 It is not all doom and gloom, however. The reduction of import duty could also mean that the Japanese could bring in models like Wish, Estima, Alphard, Vellfire and Elgrand which are aplenty on Malaysian roads. Obviously, this would be dependent on how viable the sales is. UMW Toyota Motor did try to sell the Wish (imported from Thailand) and Rav 4 (imported from Japan), but it was priced beyond reach of the masses. Honda’s Odyssey shared a similar tale. Therefore we can conclude that car prices across segments won’t see a major reduction anytime soon.

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About Jack Lee

Jack Lee is an unqualified petrol head (some say, to be one, you have to own an Alfa Romeo) who is disappointed with cars which are getting more and more electronics and the lack of interest in cars shown by today's youths in general. He owns an almost 20 year car from Germany, which has almost 50:50 weight distribution, 3 pedals (manual, FTW!) and believes that everyone should spin at the last corner of Sepang circuit at least once in their life. He also holds the distinction in TCG as the person with the lightest right foot, of course, when compared with his colleagues' mutated cast iron right foot.