KUALA LUMPUR, Jan 20 — MIDF Research has maintained its “neutral” call on the automotive sector, amid news of a potential restructuring of automotive duties which would result in an increase in duties and taxes for automotive original equipment manufacturers (OEMs).

In a research note today, MIDF said the Ministry of International Trade and Industry and the Ministry of Finance were reportedly in talks to review the duty structure for the automotive sector.

It said the Open Market Value (OMV), which has been used as the base to calculate duties for Complete Knock Down cars (CKDs), has been expanded to include royalties, assembly charges and dealer margins, as well as other costs of distribution.

“This is expected to lift the OMV slightly, but so far there is no indication on changes to the excise duties itself, which ranges between 75 per cent and 105 per cent for passenger cars.

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“Assuming the rates remain status quo, the higher OMV could result in higher effective duties payable by OEMs,” it said.

Meanwhile, MIDF also cited a report by an online portal which stated that the customs’ gazetted price or docket price for Completely Built-Up Units (CBU) would no longer be used as the base to calculate excise duties.

Previously, the docket price is determined once, using the prevailing exchange rate, and the price remains valid until the vehicle’s model code is changed, such as when a replacement model is introduced.

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“Under a supposedly new mechanism, excise duties will be charged on the actual transactional value, which means foreign exchange movements could also have an impact on duty cost.

“We note that this is not entirely new as countries such as the Philippines practices this mechanism for CBU imports,” it said.

MIDF noted that should the changes in import and excise duty mechanisms be realised, it could have a snowball impact on Sales and Service Tax (SST) charges, as SST was charged on these base values plus the vehicle duties.

The research house said preliminary checks with players suggested that there would be some increase in pricing if the incremental cost were to be passed on, but the impact would vary depending on profit and cost segregation throughout the value chain.

It also reaffirmed buy call on Bermaz Auto Bhd (BAuto) with TP of RM2.70. — Bernama

* A previous version of this story contained an error which has since been corrected.