Import Duty Cuts – Is it Really a Big Deal?..

• W

Big news for the Malaysian automotive landscape today, import duty imposed on new vehicles from Japan and Australia is expected to be reduced this year, with further reductions every year until it is completely abolished in 2016.

Our question is, will this reduction really bring a big impact for us drivers for the time being?

Based on the figures given by Ministry of International Trade and Industry (MITI) in their press conference earlier today, the duty will be reduced from 18.2 per cent in 2012 to 13.6 per cent this year.

This move may make these vehicles cheaper – by our calculations with the Lexus IS250 as an example, the price will go down by slightly less than RM11,000 (if calculated without including insurance), but this isn't really a big chunk for those who would normally buy a Lexus.

We also did calculations for the Mazda CX-5, which is manufactured in Japan, and we found that you will save about RM6,000 with the tax reduction according to our calculations – but is this really a big deal for consumers?

In today's New Straits Times, it was stated that industry observers said any cost saving for car buyers could be minimal over the short term, as import duty was not the biggest item in the country's automotive tax structure.

This is true, as the biggest item in the tax structure is the excise duty, which ranges from 60 per cent to 105 per cent, and another tax, the sales tax, is fixed at 10 per cent across the board.

So with these other taxes still in place, will the expected reduction really affect the consumers?

If you consider the rebates given by several automotive companies for purchase of their cars, especially at the end of the year, the savings after rebate is probably only slightly more than the amount saved with the tax reduction.

We also wonder if these companies will still offer their rebates if the tax reduction is introduced or if it will be abolished altogether in the future, as they may use it as an excuse to not further reduce the prices.

However, several popular models are exempted from this tax reduction as they are locally produced in Malaysia or other Southeast Asian countries, including the Toyota Camry, Nissan Almera, Honda Civic, and many others.

Car buyers can still expect to pay the full price for CKD models, so forget those savings for the more popular Japanese and Australian cars.

Reconditioned cars from those two countries are also expected to be unaffected by this tax reduction, so in the end, consumers are still forced to pay the full price plus taxes for many models.

On this note, we also wonder what cars exactly do we get from Australian car manufacturers?

Also, after getting the figures from the press conference by the MITI earlier today, we found that these tax reductions are really nothing new.

Ever since the establishment of the Malaysia-Japan Economic Partnership Agreement (MJEPA) in July 2006 under the Japan Free Trade Agreement, the duty has been gradually decreasing every year, starting at 45.5 per cent in 2006, making this the 8th year of decrement, culminating in complete abolishment in 2016.

Which begs the question – so what's the news?

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