The sales tax exemption that Malaysian carbuyers are currently enjoying was first announced in June 2020 as part of Penjana, the first stimulus package by the government to counter the crippling effects of the first movement control order. It was supposed to end along with 2020, but at the very last minute (December 29), the SST incentive was extended by a further six months, to June 30, 2021.

The SST exemption – which is 100% for new CKD locally assembled cars and 50% for CBU imported cars – was given another six-month extension when the Pemerkasa+ stimulus package was announced at the end of May. Now, the deadline for SST exemption is December 31, 2021.

But while the SST exemption is meant to support the auto industry by boosting demand for new cars, the following FMCO and subsequent EMCO for certain areas forced car factories and showrooms to close, negating the assistance. It’s close to two months now that the automotive industry has been effectively shut down in Malaysia, and carmakers can’t even fulfil existing orders.

To make up for lost time, so to speak, the Malaysian Automotive Association (MAA) is asking for another extension to the sales tax exemption. “Definitely, our members really want the SST exemption to be extended if this situation continues – even though we have orders, we cannot deliver, so what happens next?” MAA president Datuk Aishah Ahmad said in today’s 1H 2021 market review briefing with the media.

“We really plead with the government to extend the sales tax exemption should the MCO situation still be the same as it is currently, and if it’s not lifted,” she added. On how long an extension the car companies would like to see, Aishah said that more of the same would be good. “The last time they extended for another six months, we hope that they can do it for another six months,” she answered. So, it would be till June 2022 if MAA has its way.

Some might be surprised that there are Malaysians buying cars in today’s climate, but there are. MAA has revised downwards its total industry volume forecast for 2021 to 500k from the original 570k. That’s just 70k less, and half a million new vehicles sounds rather healthy in this climate. The SST exemption has definitely played its part.

The most pressing issue for the carmakers now is to fulfil orders. Aishah says that the order bank is good, but they just can’t make the cars with factories forced to close. “Orders are coming in, people still want to buy. The issue is when we’ll be able to deliver with the plants closed and showrooms closed,” she said.

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