So the tax holidays have ended and as the Sales and Services Tax (SST) came into effect on the 1st of September, most cars have experienced a reduction in price – contrary to what was previously predicted – leaving potential buyers or even mere market observers scratching their heads.
While many have yet to update their prices with the re-inclusion of SST, based on what’s been announced, you’d notice that those with a drop in price are mostly locally-assembled vehicles (CKD) but that isn’t entirely definitive either.
So why are most car prices lower than they were before during the GST era? And why are some CKD models cheaper, while some have seen a price increase?
For starters, before the GST era, the 10% SST was applied fully to the price from the distributor to dealer and as a result of the implementation of 6% GST, there was a slight price reduction.
And now with the re-implementation of SST, the further price reductions, especially on locally-assembled (CKD) vehicles, is possibly due to the localised and non-localised content of these vehicles, with SST only applying to the latter as opposed to pre-GST days when SST was still in place. As such, CKD models with high local content stand to gain from having a lower taxable base when SST is applied, hence the lower final retail prices, at least that’s our assumption.
That said, not all CKD vehicles have seen a drop in prices, like the MINI Countryman JCW, BMW X5 xDrive40e or even the Toyota Hilux for instance. It does imply that these vehicles probably contain a very low percentage of localised value. Using this reasoning, it should be clear as to why the fully-imported CBU vehicles have all seen a hike in price.
On this note, Proton has announced that the newly-implemented SST will not affect its prices yet as they will absorb the SST charge for all Proton models in September – ensuring that buyers still benefit from the tax-free price.
On top of that, Proton will be along with RM 2,000 discounts for the recently launched Proton Ertiga Xtra, in conjunction with the Malaysia Day celebrations.