MOF Extends OMV Relief: CKD Vehicle Prices Safe Until June 2026

The government has extended the full excise duty exemption on non-manufacturing costs for locally assembled vehicles until June 30, 2026, following the enforcement of Excise Regulations P.U.(A) 402/2019 (OMV).

In a letter addressed to the Malaysian Automotive Association (MAA), the Ministry of Finance confirmed that the exemption applies to costs beyond manufacturing expenses under the revised Open Market Valuation (OMV) framework.

To recap, the revised OMV framework under P.U.(A) 402/2019 expands the taxable value of locally manufactured vehicles beyond factory costs to include non-manufacturing expenses, aligning Malaysia’s excise duty calculations with World Customs Organization standards.

The extension was approved by the Finance Minister under Section 11(2) of the Excise Act 1976, providing continued relief for locally assembled vehicles as Malaysia transitions to the new excise valuation methodology.

Under the extension, non-manufacturing cost elements will remain fully exempted from excise duty. These include sales-related costs, general and administrative expenses, as well as profits.

Industry players have previously warned that applying excise duty on these additional cost components could result in vehicle price increases of between 10% and 30%, depending on model and segment.

Despite the extension, industry insiders have reiterated the need for at least a six-month grace period between the announcement of the final excise structure and its implementation, to allow adjustments to pricing, cost models and product strategies.

The government has indicated that P.U.(A) 402 will proceed as legislated. However, the absence of a finalised excise rate and implementation mechanism suggests that key elements of the framework are still being finalised.

The excise duty exemption on non-manufacturing costs has been in place since 2020, cushioning locally assembled vehicles from abrupt price increases while the new OMV framework is phased in.

MAA has also previously highlighted additional cost pressures emerging alongside the excise changes, including proposals for car brands to bear Vehicle Type Approval costs and undergo overseas manufacturing plant audits, which are expected to become mandatory in the future.