The Ministry of Finance's (MOF) announcement last month that the implementation of the open market value (OMV) excise duty revision had once again been deferred until the end of 2026 has allowed automotive companies to continue operating without immediate changes, according to the Malaysian Automotive Association (MAA).

Separately, the delay in introducing the New Customised Incentive Mechanism (NCM), which is being developed by the Ministry of Investment, Trade and Industry (MITI) together with the Malaysian Investment Development Authority (MIDA) and the Malaysia Automotive, Robotics and IoT Institute (MARii), has given the automotive industry additional time to prepare for the expected changes.

"The postponement of the OMV/402, which was supposed to be at the end of June, and the new customised incentive has provided greater certainty to manufacturers and distributors, allowing our business operations and sales activities to continue without immediate disruption," MAA President Mohd Shamsor Mohd Zain said at the association's first-half sales and production review event on July 21st.

Regarding the OMV/402, he said no further changes were expected and that the extension would allow the ministry and relevant stakeholders to finalise their calculations, reiterating comments made in January and last month.

"As I mentioned in a previous press conference, based on the engagement that we had with the government, they are working towards the policy having minimal or no impact to pricing. I think the delay has to do with the terms of the calculation of the method, and that needs a bit of time, because manufacturers have different ways of running their business, where one calculation will not suit all," he said.

"We will leave it to the experts in the government, at MOF, to come up with the formula, but we have been given a commitment that there will be little or no impact," he further added, noting that the industry would be given time to implement the changes once they are confirmed.

On the NCM, which has also been delayed, the association said it had held several engagements with MITI and its agencies.

"They are actually very supportive in terms of trying to have a much better landing for the industry. So that's why we have probably about six months more grace," he said.

Mohd Shamsor said further engagement on the NCM would take place.

"We hope that we will be able to meet somewhere (in the middle) where basically the whole industry will be able to continue to run its business while meeting the government's objective in terms of the whole ecosystem," he said.

Asked whether the new mechanism would involve greater scrutiny of local content requirements, he said this was likely.

"I think the focus will be more on increasing local content, as well as on more vendor development and technological transfers. So, these are the areas where there will be so-called future engagement as well as also preparation for the industry," he replied.

He further added that the association expects further dialogue on the matter.

"And we hope that basically once we have finalised things, it will give us time to also go through things again and continue discussions, rather than it being a surprise implementation," he explained.

Gazetted on December 31st, 2019, but repeatedly deferred since then, the OMV/402, or PU(A) 402/2019 - Excise Tax Regulations (Determination of Value of Locally Produced Goods for Excise Tax Purposes), introduced a new methodology for calculating the OMV of completely knocked down (CKD) vehicles. This valuation affects the amount of excise tax payable and, consequently, vehicle pricing.

Meanwhile, the NCM is intended to ensure that investments in the automotive industry contribute to the development of industrial capabilities. The mechanism is expected to be simpler than the current policy framework while encouraging the localisation of critical technologies rather than essential manufacturing components. It has also been under development for an extended period.