Duties on cars are substantial in Malaysia as in many Asian markets. In the case of Malaysia this is less to do with traffic congestion than with protection of their own national auto industry which as a result has a substantial share of the local market. In fact Proton and Perodua have over 75% of the new car sales so they very much dominate the market. Singapore has even higher duties than Malaysia which is perhaps understandable as they are trying to reduce the number of cars clogging their roads. Malaysia decided to introduce a smaller cheaper car in an effort to make cars affordable to all people. The resulting Kancil has had mixed reviews.

While it has certainly proved popular with many drivers particularly those at the lower income levels who previously could not afford a car, it has increased the numbers of cars on the road. Some drivers of these small cars also seem oblivious to the fact that if they hit another car they will be worse off so you will find some Kancil drivers taking advantage of the small size to squeeze into openings in the traffic when a wise person would hold back. Buying an imported car means paying a premium price and the local car industry is now producing some very good quality motor vehicles. Many expats choose to buy one. The selection of new cars has improved quite a lot but because of the small market for foreign cars, it is still not that big. Although over 30 car companies sell their cars in Malaysia many only have a few models to choose from. The Japanese have a major share of the foreign car sales but few companies achieve sales over 5000 units a year.

The foreign cars assembled in Malaysia mostly use local components according to local regulations. The result is that some models although bearing the same name as the one you drove back home may have a number of differences. By assembling them locally there is a considerable saving on costs as there is obviously no import duty on the local components and the imported parts are taxed at a lower rate than complete built up cars (CBUs) which are imported ready for the road. You will quickly see this comparison if you compare the price of say an imported (CBU) BMW with the same locally assembled model.

The duty on imported cars depends on the size of their engine and a 2000cc car will bear an import duty of around 200% of its cost including insurance and freight. Duty on four wheel drives is lower and a 2000cc four wheel drive vehicle will bear a duty of around 150%. There is also a 10% sales tax based on the cost including freight.

The Association of South East Asian Nations (ASEAN) agreed on a cut in import tariffs that would have come into effect in 2003 but Malaysia gained a two year extension on the grounds that it was the only member with a national car which was not yet ready to compete under those conditions. The new rules would virtually eliminate tariffs on goods imported from other ASEAN countries and also reduce the amount of local content which Malaysia can insist is put into locally assembled cars.

The Malaysian Minister of International Trade and Industry has indicated that other taxes will be imposed on new car sales so at this point it is not clear what impact all this will have on the price of new cars in Malaysia. Many people are hoping for a significant price reduction in January 2005 but that may not happen. Unlike many countries the selling price for new cars has to be approved by the government so you cannot shop around for the best price. From time to time motor vehicle distributors will offer incentives such as lower priced financing or extra accessories but the basic selling price rarely changes. Usually the standard accessories are priced with a hefty profit margin and they are included in the selling price and cannot be left out. So your CD player will cost a lot more than if you had it installed by a local supplier. This provides car companies with a way to make some extra money from their sales.