After Honda Malaysia announced a price hike to selected models last week, attributed to a “review to the Completely Knock-Down (CKD) customised incentives”, there were naturally fears that other brands would also be similarly affected, but the Ministry of Finance (MOF) has acted swiftly to clarify the issue in a statement via Twitter.
The MOF statement clarified that there are no changes whatsoever to the policy that governs excise duty exemptions granted under the Industrial Linkage Programme (ILP) for locally assembled vehicles made with varying degrees of localised components. Typically, a car comprising of a higher value of local content enjoys a higher degree of excise duty exemption.
MOF added that its Automotive Business Development Committee (ABDC) is using the same and unchanged assessment method to evaluate incentive proposals from automotive manufacturers but stressed that they must adhere to the existing duty exemption policies and to comply with audit reviews, as well as to practise fairness in relation to other car makers which follow the correct criteria.
While the government (now an interim one) has extended the customised incentive route to auto manufacturers for the foreseeable future under NAP 2020, the lack of clarity as to how these incentives are awarded persists since every package is ‘customised’ differently.
As the government is targeting more investments from manufacturers and to raise vehicle exports, policy transparency will go a long way in convincing car makers to make Malaysia their production base, instead of choosing Thailand or Indonesia.