TPPA, other FTAs would not reduce the car prices in near future

Kuala Lumpur: As reported last week for the release of Trans-Pacific Partnership (TPP) agreement, there were speculations made for the car prices in Malaysia. It was stated that it may or may not affect the car prices. But now, the clouds of despair have been removed after International Trade and Industry Minister II Datuk Seri Ong Ka Chuan gave a statement on this issue. He mentioned that the possibility of cheaper cars in Malaysia may have some loopholes now, even after Trans-Pacific Partnership (TPP) agreement and other free trade agreements (FTAs).

Contrary to this, the Malaysia Automotive Institute (MAI) stated that there would be a price reduction by 20% to 22% till 2018. The umbrella body representing the carmakers in Malaysia credited 'unfavourable foreign exchange' as the sole reason to expected price reduction. Although, there are car companies like Toyota and Lexus which has set high standards for their cars, followed by Honda, Nissan and Mitsubishi.

What would be the future of Malaysian Automotive market, it is still a big question for all!

To this, an industry analyst quoted by the Sun Daily said, “There is every possibility that the government will still enforce excise duty and car companies charge into-showroom cost despite the import duty reduction from various free trade agreements, including the Asean Economic Community and the ASEAN Free Trade Agreement with Japan and Australia that will come into effect next year.”

“The 12-year period will begin from 2018 if any TPPA signatories rectify the agreement within 24 months, starting from December. From there on, there will be continuous import duty reduction of 2.5% a year until 2030,” a source told the publication’s business desk.

“Malaysia largely import cars from Japan, Korea and within the Asean region. So the impact of TPPA on non-Asean cars is unknown. If we look at the current scenario, we are already enjoying zero tax import duty for cars originating from within Asean but do we see significant price reduction in the local markets?” the analyst said.

Read Also: Trans-Pacific Partnership (TPP) agreement might affect the Malaysian car prices!

At present, import duties range from 10% to 30% for CBU vehicles, but it is not the only and biggest factor in coming up with a car’s retail price, which takes into account the vehicle’s ex-factory price, sales tax, excise duty and profit margin of the local distributor.

Excise duties range from 65% to 105%, but some companies enjoy a 40% to 50% rate thanks to high localisation. “Will the government lower, maintain or increase the excise duty by 2018? That’s government prerogative for domestic tax,” the analyst said.

The report’s source also raised another factor saying, “I am convinced that the car dealers would still want to maintain or increase the profit margin even though the various trade agreements will provide lower tariffs and bigger access to larger markets.”

Read Also: Will car's be cheaper in Malaysia in the coming future?

So, looking after each and every factor that could change the course of Malaysian Automotive market, one should not expect much from the government and carmakers that they will really think of your well being! Although, if you can manage to stay happy in between all this discussion, you should wait for the final dictum to be announced in this matter.