20 to 30% cut in car prices over five years
KUALA LUMPUR (Jan 20, 2014): The National Automotive Policy (NAP) announced today that it is committed to a gradual reduction of prices ranging between 20% and 30% over the next five years.
However, International Trade and Industry Minister Datuk Seri Mustapa Mohamed (pix), who announced it, stopped short of giving details on how the reduction would come about.
Mustapa explained that a car price reduction framework had been developed to fulfill the promise of gradual price reduction, comprising measures to be taken by the government and the industry.
Mustapa said the government is open to the possibility of reducing excise duty, a major component of car taxes that hike prices, but this could only be done on a gradual basis once the country's fiscal situation permits.
"We are constantly reviewing our fiscal position. Our deficit level is now 4%. In the event our revenue improves, we may review the excise duty.
"We will reduce excise duty gradually over a period of time," he told reporters after announcing NAP 2014 here today.
Excise duties for non-national cars under 1,800cc engine capacity are at 75% currently for completely-knocked down (CKD) and completely-built up (CBU) units.
Mustapa said models such as Saga SV, Persona SV, Viva, Alza, MyVi S Series, the new Honda Jazz and Nissan Almera, which accounted for 30% of market share in 2013, were introduced at reduced prices of between 3% and 17% under the election manifesto last year.
"More new models and variants will be introduced at competitive prices in 2014," he said, adding for example, that prices of the new Viva introduced in January this year were lower by 2-7%.
"These new models and variants are forecast to capture 55% of market share," he said.
According to Mustapa, liberalisation is to create a more competitive environment and enable greater market forces leading to more competitive prices.
Industry players, he said, play a vital role in making their operations more competitive to reduce costs.
NAP 2014's key objective is to make Malaysia a regional automotive hub for energy-efficient vehicles (EEVs), to be achieved by issuing manufacturing licences (ML) to all car companies without any engine capacity restrictions.
This will be followed with customised incentives for each investor coming into the country, which will eventually contribute towards a lowering of EEV car prices in the country.
Mustapa also announced the exemption of excise duties and import taxe for hybrids and electric vehicles (EVs) will be applicable only to models assembled in Malaysia.
The exemption will be extended until Dec 31, 2015 for hybrids and Dec 31, 2017 for EVs. Beyond those dates, the exemptions will be determined based on the strategic value of these CKD assembly investments and the import and excise duties exemption on CBU hybrid and electric vehicles will be discontinued.
On Approved Permits (APs), Mustapa said the government will conduct an in-depth study on the issue to assess the impact of the termination on bumiputra participation in the automotive industry.
"We are not backtracking. We will be doing a thorough study which will start after Chinese New Year," he said, adding that NAP 2009 had specified the termination of open APs by Dec 31, 2015 and Franchise APs by Dec 31, 2020.
NAP 2014 is expected to transform Malaysia's automotive industry to be one of the important components of the country's economy.
The automotive industry employs about 550,000 people and contributed RM30 billion to the national GDP in 2013.