Close Ad

are cheaper cars on the horizon again

Are cheaper cars on the horizon… again?

Ministry mulls reducing duties that should be compensated by a bump up in sales volume

Dinesh Appavu Photo

Dinesh Appavu

25 Jan 2019

If the song is a familiar one, take some consolation that the band covering that tune is an entirely different one. The International Trade and Industry Ministry (Miti) has expressed consideration in reducing the excise duties on vehicles that it’s hoping will translate into lower car prices and increased sales to compensate the loss in revenue.

“Of course, there is a cost-benefit involved here in the sense that you have more tax reduction in the excise duty. The government may collect less per unit, but whatever revenue lost by the Finance Ministry can be regained by the increase in the sales volume because car prices would be lower,” said Ong Kian Ming, the Deputy International Trade and Industry Minister.

He hoped that if the move came to fruition, it would represent a win-win situation for car buyer and industry players as well as the government.

The move however stems on two very critical factors; firstly being estimates from industry players of the expected increase in sales as a result of the reduction in duties. Simply put, these are carmakers and vendors providing figures that would support the increased sales volume compensating the loss per vehicle.

Secondly however, is the fact that the carmakers themselves translate the reductions in duties into their final sales prices and not operate on larger profit margins. While the government sets the docket pricing, the final price of the vehicle is solely the prerogative of the manufacturer.

Ong went on to add that the government wants to encourage the development of the local vendor ecosystem via the Industrial Linkage Programme (ILP) and customised incentives. The former are incentives that encourage local OEMs to source locally produced components to build the capacity of local suppliers. As such, they’re able to apply for customised incentives for energy-efficient vehicles (EEV) for an increase in excise duty reduction.

On top of car prices reducing with respect to the reduction in duties, the ILP incentives should further lower the prices of vehicles; according to a report by The Star.

The specific mechanics behind the move though are still very much murky, though a safe bet would be more incentives being introduced for EEVs. A clear picture is only expected to surface following the National Automotive Policy’s release at the end of this quarter.

Ong broke the news to reporters following an announcement of the Automotive Business Development Committee (ABDC) increasing the frequency of its monthly meetings from once to twice to quicken the processing of automotive incentive applications.

In a move to promote transparency in the evaluation of incentives, Miti would outline an enhanced process flow and client charter of ABDC for greater transparency of the process.

Ong added that it would take about two days to process and approve the ILP at the ABDC stage before a letter is sent to the Finance Ministry and about a week for customised incentives.

TAGS: miti car sales