Government reverses excise duty hikes for MPVs, SUVs

KUCHING: The Royal Malaysian Customs Department (Customs) has rescinded its decision to raise excise duties for multi-purpose vehicles (MPVs) and sports utility vehicles (SUVs) with engine capacities of not more than 1.5 litres.

According to Customs, the decision for the rescindment was made after taking into account the high demand for completely built-up vehicles and the ensuing effects a price hike from automotive players would have on the industry.

“Through this move, the price of vehicles to purchasers must be maintained and vehicle manufacturers cannot raise their prices based on the increase in excise duty rate which have been gazetted through the Excise Duty Order 2017 on March 31, 2017,” said RMCD director general, Datuk Indera Subromaniam Tholasy.

He went on to add that the rescindment would be applicable to all vehicles involved in the previous excise hike.

With direct instruction from the RMCD, it is highly likely that all automotive players will reverse their decisions in raising prices.

To date, Toyota had announced on Tuesday that it would be raising its pricing for the Avanza by RM3,700 to RM4,000 the Sienta by RM4,000 and the Rush by RM4,990 to RM6,000 in a bid to pass on the incremental duty cost to consumers.

Sources from Honda had also suggested that the pricing of its BRV would also follow suit and experience an increase of RM4,000 in the coming weeks.

These high price increases were found to be rather surprising as estimates from the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) suggested incremental costs arising from the duty hike to be between RM223 to RM2,253 for MPV models – much lower than the price increase Toyota has since announced.

The research arm explained that these price increases beyond the actual incremental duty and input GST cost were partly due to players attempting to maintain their profit margins as they expect lower volumes of sales as a result of the passing on of the incremental duty cost to consumers.

MIDF Research opined that the rescindment has no impact to their sector views and maintains Bermaz Auto Bhd (Bermaz) to be its automotive sector pick with a ‘Buy’ rating and a target price of RM2.50 per share.

“Bermaz’s key share price growth catalysts over the next 12 months are its attractive dividend yield of 9 per cent, listing of its Philippines associate, double of its associate earnings contribution, and the launch of its new CX5 and CX9 models which are expects to drive a recovery in volumes and margins,” justified the research arm.