Recently a few automotive industry leaders have shared with us news that the new Malaysian government has decided to put a stop to Semi Knocked Down (SKD) assembly of vehicles and only Completely Knocked Down (CKD) assembly will be allowed for the preferential import tax benefits (lower taxes means lower selling prices). Of course, fully imported vehicles can continue to be brought in and the tax paid will continue to be higher than CKD vehicles.

Only full knocked down assembly like this will enjoy Malaysian tax benefits

This confirms two statements we at made earlier.

“No.1…car prices in Malaysia will NOT be going down in the near to medium future”.

“No.2…the SKD system in Malaysia has been abused by some car brands to earn higher profits (financial profits get sent back to the parent country and) we in Malaysia do not benefit from these tax incentives. Some foreign giant corporation enjoys our tax benefits and our higher car prices (they earn added profits from this).

So, car brands that have been enjoying ‘extra’ profit margins will now be scrambling to meet new requirements or they will go into full CBU business and thus have their total sales numbers drop from their lofty heights enjoyed these past few years.