It’s good news for the Malaysian automotive industry as the open market value (OMV) excise duty revision issue that crops up every year end, threatening price increases of up to 30% for CKD locally assembled cars, has been finally resolved. For good.
In December 2025, we reported Malaysian Automotive Association (MAA) president Mohd Shamsor Mohd Zain saying that although the PU(A) 402/2019-Excise Tax Regulations (Determination of Value of Locally Produced Goods for Excise Tax Purposes), will be implemented this year, it will incorporate a new method that will have ‘very little or no impact to pricing’ of CKD cars.
Then, just before 2025 ended, the finance ministry announced that the OMV revision, which was supposed to begin in January 2026, has been deferred once more, this time by six months. Turns out that there’s nothing to be feared about this latest deferment, and the lingering issue has indeed been solved.
Mohd Shamsor, at today’s annual MAA 2025 review/2026 outlook briefing, said that the extra six months is just for relevant parties to ‘finalise calculations’ – there was no last minute twist in December. “We have been given the understanding that basically, the impact that we’re working on will be very minimal, or even zero impact,” Mohd Shamsor said today.
“The reason why it takes about six more months is that they have to finalise (the calculations) because the different OEMs (doing CKDs) have different ways of declaring their business. So they have to fine-tune and make sure it’s a fair proposal, to make sure that it’s being managed in a level playing field. So that’s why they need the additional six months, to finalise the calculation,” he explained.
What’s this OMV/402 issue all about again? Here’s an explainer on the bullet we’ve been dodging for years, and how we got here. The controversial ‘402’ – gazetted on the last day of 2019 – stipulated a new methodology of calculating a CKD vehicle’s OMV, which influences how much tax is to be paid and therefore, its selling price. OMV is defined as the final market value of a CKD vehicle ex-factory, before the government imposes excise duties on it.
It’s primarily made up of the cost of the CKD pack, cost of manufacturing and components as well as assembly and administration charges. Note that fully-imported (CBU) vehicles use a different system – prices for these are based on Cost, Insurance and Freight (CIF), on which import and excise duties are imposed.
The PH-era regulations set that in calculating OMV, one must take into account not just the profit and general expenses incurred or accounted in the manufacture of a vehicle, but also of its sale. It was this ‘sale’ clause that got industry players up in arms, because it involved areas such as engineering, development work, art work, design work, plan and sketch, royalty payments and license fees (patent, trademark, copyright). Think of it as ‘factory costs’ plus ‘office costs’.
The regulations were supposed to come into force in 2020, but 22 days into that pandemic year, MAA announced that the finance ministry had deferred implementation to 2021. By end-2020, it was deferred again, and MAA appealed to the government in 2022 for continued deferment, which was successful – a two-year deferment was granted, until December 31, 2024. The latest deferment is until December 31, 2025.
As you can imagine, this uncertainty isn’t good for a company’s planning, forecasting and operations. Without clarity, investments will also be hampered – no one wants to invest in local production and ‘live on the edge’ every December hoping for the best. No exaggeration here – the second deferment was announced just two days before 2021 ended!
If prices of CKD cars do go up by as much as 30%, perhaps OEMs will not bother with the hassle of local production and just bring in CBU imports – this would be a loss for the industry and country. Yes, the government would collect more taxes with the revised OMV in the short term, but if higher prices damage sales volume (all-time high in 2024, we have momentum), production and eventually job opportunities for the rakyat, it could be an example of being penny-wise but pound-foolish.
Perhaps the subsequent administrations after Pakatan Harapan did see the logic behind the auto industry’s argument, hence the constant stays of execution, but kicking the can down the road via annual deferments surely isn’t the way to go.
In early 2025, the finance ministry said that “MoF, together with MITI and the automotive industry, is currently reviewing the vehicle valuation method to ensure that the imposition of tax is carried out in a fair, neutral and consistent manner”. Looks like the government and the auto industry have finally found common ground. Case closed, finally.
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