Motoring Guide : The Price of Cars – Duties and All That.

Duties
on cars are substantial in Malaysia as in many Asian markets.
In the case of Malaysia this is less to do with traffic congestion
than with protection of their own national auto industry which
as a result has a substantial share of the local market. In fact
Proton and Perodua have over 75% of the new car sales so they
very much dominate the market. Singapore has even higher duties
than Malaysia which is perhaps understandable as they are trying
to reduce the number of cars clogging their roads. Malaysia decided
to introduce a smaller cheaper car in an effort to make cars affordable
to all people. The resulting Kancil has had mixed reviews.



While it has certainly proved popular with many drivers particularly
those at the lower income levels who previously could not afford
a car, it has increased the numbers of cars on the road. Some
drivers of these small cars also seem oblivious to the fact that
if they hit another car they will be worse off so you will find
some Kancil drivers taking advantage of the small size to squeeze
into openings in the traffic when a wise person would hold back.
Buying an imported car means paying a premium price and the local
car industry is now producing some very good quality motor vehicles.
Many expats choose to buy one. The selection of new cars has improved
quite a lot but because of the small market for foreign cars,
it is still not that big. Although over 30 car companies sell
their cars in Malaysia many only have a few models to choose from.
The Japanese have a major share of the foreign car sales but few
companies achieve sales over 5000 units a year.



The foreign cars assembled in Malaysia mostly use local components
according to local regulations. The result is that some models
although bearing the same name as the one you drove back home
may have a number of differences. By assembling them locally there
is a considerable saving on costs as there is obviously no import
duty on the local components and the imported parts are taxed
at a lower rate than complete built up cars (CBUs) which are imported
ready for the road. You will quickly see this comparison if you
compare the price of say an imported (CBU) BMW with the same locally
assembled model.



The duty on imported cars depends on the size of their engine
and a 2000cc car will bear an import duty of around 200% of its
cost including insurance and freight. Duty on four wheel drives
is lower and a 2000cc four wheel drive vehicle will bear a duty
of around 150%. There is also a 10% sales tax based on the cost
including freight.



The Association of South East Asian Nations (ASEAN) agreed on
a cut in import tariffs that would have come into effect in 2003
but Malaysia gained a two year extension on the grounds that it
was the only member with a national car which was not yet ready
to compete under those conditions. The new rules would virtually
eliminate tariffs on goods imported from other ASEAN countries
and also reduce the amount of local content which Malaysia can
insist is put into locally assembled cars.



The Malaysian Minister of International Trade and Industry has
indicated that other taxes will be imposed on new car sales so
at this point it is not clear what impact all this will have on
the price of new cars in Malaysia. Many people are hoping for
a significant price reduction in January 2005 but that may not
happen. Unlike many countries the selling price for new cars has
to be approved by the government so you cannot shop around for
the best price. From time to time motor vehicle distributors will
offer incentives such as lower priced financing or extra accessories
but the basic selling price rarely changes. Usually the standard
accessories are priced with a hefty profit margin and they are
included in the selling price and cannot be left out. So your
CD player will cost a lot more than if you had it installed by
a local supplier. This provides car companies with a way to make
some extra money from their sales.