Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 28, 2022 - April 3, 2022

THE Malaysian Automotive Association (MAA) will appeal to the government for a further extension of the automotive sales and service tax (SST) exemption to end-2022 in order for car manufacturers to fulfil their backlog of orders, president Datuk Aishah Ahmad said. She was speaking at a press conference after MAA’s annual general meeting last Friday.

Originally scheduled to end on Dec 31, 2020, the SST exemption has been extended thrice — first to June 30, 2021, and then to Dec 31, 2021, with the latest extension to June 30 this year. The exemption was introduced as part of the Penjana stimulus package to mitigate the effects of the first Covid-19 Movement Control Order, which came into effect in March 2020.

According to Aishah, depending on the models, carmakers’ backlog of orders stretches up to six months, on the back of a shortage of spare parts and raw materials to produce the parts due to the pandemic.

“We are now drafting the appeal letter to the Ministry of Finance (MoF) to request an extension [of SST exemption for passenger vehicles] and we will submit it after [our] annual general meeting,” she said.

There is no end in sight for the Covid-19-led global supply chain disruptions as the ongoing Russia-Ukraine war has added pressure on the shortage of microchips used in manufacturing cars, Aishah said, adding that she expects the situation to persist at least until year end.

The full SST exemption is implemented on locally assembled — also known as completely knocked-down (CKD) — passenger vehicles, including multipurpose vehicles (MPVs) and sport utility vehicles (SUVs), while 50% SST exemption is levied on completely built-up imported passenger cars, including new and used MPVs and SUVs.

Car prices could increase up to 20% next year

MAA also hopes that the government will extend the implementation of new excise duty regulations on the open market value (OMV) for CKD vehicles. Aishah said CKD cars may cost more with the updated OMV calculations.

“With the calculation of [the new] excise duty, [it] means the car prices on the road will increase 8% to 20%. We have appealed to the government to extend it further [beyond] 2022. [But] if it’s not extended, it means all car prices will go up by next year,” she said.

Currently, the OMV only takes into account the cost for the manufacture of a said item, she noted.

It was previously reported that under the new OMV calculation, areas such as engineering, development work, art work, design work, plan and sketch, royalty payments and licence fees (patent, trademark and copyright) would be taken into account as well.

MAA’s total industry volume (TIV) target of 600,000 for 2022 remains intact for now, pending the approval of the SST exemption. The TIV target for 2022 represents a 17.9% growth from the 508,911 units recorded in 2021.

Aishah said car sales for this year are expected to improve on the assumption that there would be no more lockdowns imposed on the country. “We will be revising the 600,000 target later if MoF gives the green light on the SST exemption,” she added.

A total of 43,722 vehicles were sold in February throughout the country, up 8% from the 40,581 units sold in January, as car companies ramped up production to fulfil a backlog of orders. On a year-on-year basis, the vehicle sales figure was up a marginal 1.01% from 43,448 units in February 2021.

 

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