CKD Excise Duty Revision: Govt Studying Measures to Ease Impact

The government is exploring ways to cushion the potential rise in car prices once the current excise duty exemption for locally assembled vehicles ends later this year.

Deputy Finance Minister Lim Hui Ying said the government is collecting data and holding consultations with industry players to find workable solutions before the new excise structure takes effect.

She noted that the actual price impact remains uncertain, as local assemblers operate under different business models that result in varying excise duty calculations.

“Nevertheless, the government will take mitigation measures to minimise the impact on the public,” Lim told the Dewan Rakyat during the oral question session on Thursday.

Her response came following a query from Datuk Shamshulkahar Mohd Deli (BN–Jempol) on whether the government would defer or proceed with enforcing the excise duties on completely knocked down (CKD) vehicles.

The excise duty exemption for locally assembled cars stems from the Excise Regulations (Determination of the Value of Locally Manufactured Goods for the Purpose of Imposing Excise Duty), or P.U.(A) 402/2019, which has been in effect since 2020.

The regulation seeks to expand the taxable value of CKD vehicles beyond manufacturing costs to include non-manufacturing expenses such as sales, marketing, administrative costs and profits - collectively known as open market value (OMV).

The updated OMV calculation, scheduled to take effect in Jan 2026, is part of Malaysia’s move to align with World Customs Organization (WCO) standards.

However, the Malaysian Automotive Association (MAA) has repeatedly voiced concern that the new structure could increase the prices of locally assembled cars by between 10% and 30%, depending on model and segment.

Industry sources say authorities are exploring a revised calculation formula to lessen the impact, though no final details have been confirmed. MAA, as reported previously, has also stressed that manufacturers need at least six months of lead time to plan for 2026 models, adding that the current uncertainty is complicating product and pricing strategies.

Despite these concerns, the government has indicated that P.U.(A) 402 will proceed as scheduled under the Customs Act.

For now, the industry awaits more clarity on the excise duty framework and possible mitigation measures, with many watching closely to see whether the government will offer transitional support to protect both manufacturers and consumers.

Source: The Edge