Why Are Cars So Expensive in Malaysia – Cars are an essential part of modern life. They provide transportation to work, school, and leisure activities.
Owning a car in Malaysia can be a financial burden due to the high prices of cars. Malaysia has one of the highest car prices in the world, and this is a major concern for many Malaysians. In this article, we will explore the reasons why cars are so expensive in Malaysia and provide recommendations to address the issue.
Reason Why Are Cars So Expensive in Malaysia
Government Policies and Taxes
The Malaysian government has imposed various taxes and tariffs on imported cars to protect the domestic automotive industry.
The taxes and tariffs are meant to encourage Malaysians to purchase locally-produced cars, such as Proton and Perodua. However, these policies have resulted in higher prices for consumers.
One of the main taxes imposed on imported cars is the import duty. The import duty for passenger cars in Malaysia ranges from 60% to 105%.
The duty is based on the value of the car, and it is added to the sales price of the car. This makes imported cars significantly more expensive than locally-produced cars.
In addition to import duty, Malaysia also imposes excise duty on cars. The excise duty is based on the engine capacity of the car, with higher engine capacity cars attracting a higher excise duty.
For example, cars with an engine capacity of 1.6 liters or less attract an excise duty of 65%, while cars with an engine capacity of 2.0 liters or more attract an excise duty of 105%.
These high excise duties make it difficult for Malaysians to afford larger cars, which are more practical for families.
Furthermore, the National Automotive Policy (NAP) introduced by the Malaysian government in 2014 has contributed to the high car prices in Malaysia.
The policy aims to promote the development of the domestic automotive industry and reduce the country’s dependence on imported cars.
The policy has resulted in limited competition in the market, as it favors the two dominant local car manufacturers, Proton and Perodua.
This lack of competition has led to higher prices for consumers, as Proton and Perodua have a monopoly on the market.
According to a report by the Malaysian Institute of Economic Research, the NAP has increased car prices by 20-30% compared to the prices in other ASEAN countries.
This has resulted in Malaysians paying higher prices for cars than consumers in other countries in the region.
The lack of competition in the Malaysian car market is another factor contributing to the high prices of cars.
Proton and Perodua have dominated the local car market since the 1980s, and they continue to hold a significant market share today.
In 2020, Proton and Perodua accounted for 70% of the total car sales in Malaysia.
This lack of competition has resulted in higher prices for consumers. Proton and Perodua are able to set high prices for their cars without fear of losing customers to competitors.
Furthermore, the limited competition has stifled innovation in the market, as the dominant players have little incentive to invest in research and development.
The lack of competition in the Malaysian car market has also resulted in a limited choice of cars for consumers.
Malaysians have fewer options when it comes to choosing a car, as they are limited to the offerings of Proton and Perodua. This has resulted in consumers paying high prices for cars that may not meet their specific needs.
Cost of Production and Labor
The cost of producing cars in Malaysia is another factor contributing to the high prices of cars. The cost of labor in Malaysia is relatively low compared to developed countries, but the cost of producing cars in Malaysia is still high due to the cost of raw materials and other inputs.
One of the main raw materials used in car production is steel. The cost of steel in Malaysia is higher than in other countries due to the lack of competition in the steel industry.
The two dominant steel manufacturers in Malaysia, Ann Joo, and Lion Industries control over 70% of the market.
This has allowed them to set higher prices for steel, which has increased the cost of car production in Malaysia.
Furthermore, the depreciation of the Ringgit has also contributed to the high cost of car production in Malaysia.
The Ringgit has depreciated significantly in recent years, which has increased the cost of importing raw materials and other inputs for car production.
This has resulted in higher production costs for car manufacturers, which are passed on to consumers in the form of higher car prices.
What is an expensive car in Malaysia?
An expensive car in Malaysia would typically refer to luxury cars such as BMW, Mercedes-Benz, Audi, and other high-end car models. It is important to note that car prices in Malaysia can be high across different car segments due to various factors such as government policies, taxes, and production costs.
What is the most popular car in Malaysia?
The most popular car in Malaysia is the Perodua Myvi, which is a locally manufactured compact car model. It is known for its affordability, fuel efficiency, and practicality, and has been a top-selling car model in Malaysia for several years.
Is it OK to buy a car in cash in Malaysia?
Yes, it is possible and acceptable to buy a car in cash in Malaysia. However, it is important to note that car dealers may offer financing options and loans with attractive interest rates that can be beneficial for some buyers.
It is recommended to carefully consider all financing options available and compare them before making a final decision on how to pay for a car purchase.
In conclusion, there are several reasons why cars are so expensive in Malaysia. Government policies and taxes, limited competition, and the cost of production and labor all contribute to the high prices of cars in the country. To address the issue of high car prices, several recommendations can be made.
Firstly, the Malaysian government can reduce the import duty and excise duty on cars. This will make imported cars more affordable for Malaysians and increase competition in the market.
The government can also review the NAP and consider measures to encourage competition in the car market.
Secondly, car manufacturers in Malaysia can invest in research and development to innovate and offer more diverse and practical car models.
This will provide Malaysians with more options when it comes to choosing a car, and increase competition in the market.
Lastly, the Malaysian government can also review the steel industry to promote competition and reduce the cost of raw materials for car production.
This will help to lower the cost of producing cars in Malaysia, which will result in lower car prices for consumers.
The high prices of cars in Malaysia are a major concern for many Malaysians. The reasons behind the high prices are complex and involve government policies and taxes, limited competition, and the cost of production and labor.
To address the issue of high car prices, the Malaysian government and car manufacturers can take several measures to increase competition and lower production costs.
By doing so, Malaysians can enjoy more affordable car prices and a wider choice of car models.