LAST_UPDATEThu, 21 Jun 2018 7pm

Everyone Knows Cars Are Overpriced In Malaysia, So What's New?

Cars are very expensive in Malaysia - in fact we’re the second most expensive place in the world to buy cars, right behind Singapore according to motoring magazine Jalopnik. Malaysians have lived with this unnatural burden for decades, so what's new?

A ray of hope had emerged on the horizon when the National Automotive Policy 2014 (NAP) was announced in 2012 ahead of the 13th General Election promising a gradual reduction in car prices through 2017. Today, we are already in the 3rd quarter of 2015 but cars are still prohibitively expensive when factored into the cost of living in Malaysia.

For a long time, our overpriced cars were somewhat offset by our heavily subsidised fuel system as well as subsidies in essential daily items which are now gradually being removed. So Malaysians risk having to pay for both higher fuel prices and cost of living in addition to overpriced cars unless the government pursues the objectives of the NAP 2014 more aggressively.

But Why Are The Cars So Expensive?

The price of a car is determined by its manufacturer, taking into consideration various factors and market forces. In Malaysia, no import duty is imposed for cars originating from Asean countries, while 30% import duty is imposed on vehicles imported from non-Asean countries.

Car prices are further escalated by the tax rate and excise duty imposed. According to Malaysian Automotive Association (MAA), the excise duty imposed on cars ranges from 65% to 105%, on top of the 10% sales tax.

According to the Estimates of Federal Government’s Revenue for the Year 2014 by the Ministry of Finance, Malaysia, the import duty collected on motor cars for 2013 is estimated RM2,417 million compared to 2012 at RM2,282 million.

Below is a price comparison of Malaysian and global car prices for the years 2008-2010.

Abolishing Taxes Is The Obvious Solution But Not Politically Or Economically Viable To Stakeholders

Qhalis Najmi is the editor and automotive journalist at and founder of Thenewaddiction|Autography, and he drives an Audi S4.

He believes that taxes are the biggest problems and should be abolished.

“For whatever you're paying now for your car loan at RM70,000 - 90,000, if there were no taxes you can get those at the price of RM30,000. That means the Toyota Vios, Mazda 2, Toyota Hilux, Ford Ranger and the Honda City would cost cheaper than a Myvi.

“They should really up the game, it should have been an encouragement, for Proton to invest in R&D to create their own cars. Instead of investing in R&D, they are investing in Copy & Paste.

If taxes were lowered, obviously Proton would be affected and their quality has never been up to par with other competitors.

“Perodua is faring slightly better but then again that’s just a Toyota in disguise.

While buying the lower segment cars can show a difference in pricing, the gap is fully shown when you buy a more expensive car.

“I know a guy who bought a Ferrari and abroad it costs RM1 million, with full customizations. Over here, he paid over RM 2 million, minus any customizations. That’s just to show how much tax was paid just for the government.

Editor of and automotive journalist, Qhalis NajmiEditor of and automotive journalist, Qhalis Najmi“The price should go down to help with the public, by eliminating the tax. If that’s not possible, then a drastic reduction at least.

“We had the tax to protect our national car industry, Proton, during the 1980s. But as we can see it now it has been 20 years plus and Proton hasn’t achieved full independence, with many of their cars still repackaged, and their quality, in comparison with rivals Hyundai for example who started around the same time - of lesser value.

“Hyundai started just the same as Proton yet look at where they are now”.

And if there ever was a tax cut, used car dealers would also suffer.

Ahmad (not his real name) works at a used car dealership, and agrees that the quality of Proton is negligible. He also said that the domino effect of a tax cut would echo through the country.

“If the tax of the cars are cut, obviously used cars would also be priced cheaper.

“As a dealer, there is, however, a loophole in the system. This mostly applies to those buying expensive cars. What happens is that they buy the car from us but they don’t register - as in they don’t pay the insurance or the road tax. The car technically does not exist in Malaysia." Bear in mind this is totally illegal and we at Malaysian Digest are not condoning it!

Excise Duties And Import Taxes Play An Important Economic Role, Not Just Protectionism – MAI

Madani Sahari, the CEO of Malaysia Automotive Institute (MAI) states his case on behalf of the local automotive industry.

The automotive tax system consists of excise duties, import and sales taxes.

“The excise duties, in particular, serve to encourage domestic manufacturing of automotive components. This is not limited to local companies only, as foreign OEMs and component manufacturers may also invest in the Malaysian automotive industry. It is unfortunate that many perceive excise duties are in place only to protect PROTON.

“In the current automotive taxation system, the amount of duties and taxes will be reduced proportionate to their added value to the domestic automotive ecosystem. This means that any company that brings value to the Malaysian people (eg. R&D, tooling technology, high value employment, etc) may pay lower excise duties, which in turn translates into a lower sales price.

“The Malaysian automotive industry today is a product of a 3 decade long, but unique learning curve, surviving 2 recessions and have created jobs and entrepreneurs, delving in a technologically demanding sector. Naturally, we have had our fair share of hits and misses. We are fully aware of the need to innovate to be competitive at home and also abroad.

The National Automotive Policy 2014 (NAP 2014) was formulated in view of local industry development, impact of changing tariff structures in the region and most importantly, the impact of new technology on the industry, especially green technology.

The NAP 2014 calls for a focus on making Malaysia a regional hub for Energy Efficient Vehicles (EEV).
“As competitiveness is enhanced and a high value economy is created, this would naturally pave the way for vehicle sticker prices to be reduced.

“The National Automotive Policy (NAP) 2014 also includes initiatives to manage reduction of vehicle selling price. The Car Price Reduction (CPR) programme has successfully reached an average reduction of about 17 percent (17%) since 2013” he claims.

“This will create more competition, creating an industry ecosystem that leads to better pricing, quality as well as product offerings.

“Global trends show that liberalization is inevitable. However, Malaysia's path towards liberalizing the automotive sector must be conducive towards the development of local OEMs and vendors, as addressed in the NAP2014.

“MAI is of the opinion that as long as domestic OEMs, including PROTON and PERODUA align themselves towards the liberalization of the local automotive industry and the direction towards Energy Efficient Vehicle (EEV), they would be successful in breaking their glass ceilings and will be globally competitive.”

High Car Prices Can Be Offset By Improving Public Transportation - FOMCA

Datuk Paul Selvaraj, CEO of Federation of Malaysian Consumers Associations confirms what the public feels.

Paul confirms that the car prices did go down a little bit, but that was only because of the GST - and it won’t go down significantly in the near future, especially with the high currency exchange rate.

“We need to lower down the taxes, but more importantly we need to focus on public transportation”, he tells mD. “The MRT project is good, but the main thing is the Last Mile - the bus system, which is grossly inadequate.

“Cars should become a choice, and not a necessity, because for most of us, next to the house the car is the most expensive item. The number one reason for bankruptcy - are because of cars. It's a big chunk of your income and monthly expenses, which also takes in your petrol, insurance, parking and maintenance fees.

“If you can reduce that by relying on a very good public transportation system, that’d be good. But people has less faith and in trains and buses - hence the car becomes necessary.

“But also, reduced taxes would also mean many more cars on the road, more congestion on the road, burden on households, more parking problems, and with the poor public that should be there first.'

“Malaysia can have high taxes, but make sure there’s a choice of taking good public transportation - like in Singapore.

"We need to focus on the bigger picture. Public transport should be the focus.

“In regards to Proton, we should move on to introducing more competitive pricing, like other countries”.

He parts with a pearl of wisdom for those who are seeking to buy their cars, especially graduates:

“For fresh graduates, public transportation should be their main means of moving around. And if necessary, then get a car if your finances allow.

“But it's better to buy a house because it appreciates in value, a car depreciates. Having said that it becomes a necessity, and whether new or old, get a car that is affordable.

“Affordability becomes crucial when you are still new in your career. Get it only once you’re more financially stable”.

- Malaysian Digest