Why Cars Cost So Much in Malaysia: Excise Duty, Import Duty, Sales Tax and the OMV

Three taxes, charged one on top of the other

Every new car in Malaysia passes through up to three levies before it reaches a showroom floor:

• Import duty — charged only on vehicles brought in built-up, at up to 30% depending on origin. Vehicles from ASEAN countries enter at 0% under the ATIGA free-trade agreement, which is why so many models sold here are shipped from Thailand or Indonesia.
• Excise duty — the big one, at 60% to 105% depending on body type and engine capacity. It applies to imported and locally assembled cars alike, and for an imported car it is charged on the value that already includes the import duty.
• Sales tax — 10% on motor vehicles, charged on the running total of value plus import duty plus excise duty.

The OMV: the number the tax is actually charged on

None of these percentages apply to the showroom price. They apply to the open market value (OMV), a figure determined by the Royal Malaysian Customs Department. For a built-up import the OMV is built from the transaction value of the vehicle plus insurance and freight to the Malaysian port. For a locally assembled car it is built from the cost of the imported components plus local assembly costs — it deliberately excludes the distributor's profit, advertising and dealer margin, which are added after the tax is computed.

The OMV is never published model by model, which is the main reason duty-free quotations circulating online are guesswork. What you can rely on is the structure: a typical mainstream car's OMV is a fraction of its on-the-road price, and the multiple between the two is set by the excise band it falls into.

Excise duty bands for passenger cars

Excise duty on saloons and hatchbacks steps up with engine capacity, and the steps are large enough to shape the whole Malaysian model line-up:

Why this makes cars so expensive

MPVs, vans and four-wheel-drive vehicles sit on separate, generally lower schedules starting around 60% to 65%, which is part of why a seven-seat MPV can be priced close to a smaller saloon. The practical effect of the bands is that crossing from 1,799 cc to 1,800 cc, or from 1,999 cc to 2,000 cc, moves the whole vehicle into a costlier bracket — so manufacturers engineer to stay just underneath. Take two cars with the same RM60,000 OMV: one a 1.8-litre built-up import from a non-ASEAN country, the other a 1.5-litre assembled locally or shipped from within ASEAN.

What the comparison shows

On the imported car the tax is RM94,440 on a RM60,000 vehicle — 157% of its own value — and it has not yet absorbed shipping, distributor margin, dealer margin, registration or the first year's road tax and insurance. The same OMV routed through local assembly or an ASEAN plant carries RM38,940 less tax, from the 0% import duty and the lower excise band together. That single structural fact explains most of the Malaysian market: why national and ASEAN-built models dominate volume, why European marques assemble here, and why the few genuinely imported models are priced where they are.

Approved Permits (AP)

On top of duty, a built-up vehicle also needs an Approved Permit from MITI before it can be imported. Franchise APs go to official distributors bringing in models they represent; open APs go to independent importers, largely of grey-import and used vehicles, and are allocated in limited numbers each year. The AP fee is RM10,000 per vehicle and is simply another cost loaded into the final price.

Because open APs are rationed, their scarcity shows up directly in recond-car pricing — when the year's allocation tightens, grey imports get more expensive regardless of what happens in the source market. The open AP system has been announced for phase-out several times and the deadline has been pushed back repeatedly, so check its current status with MITI rather than assuming.

Where electric vehicles stand

EVs were carved out of this structure to seed the market. Locally assembled (CKD) electric vehicles carry an exemption from import and excise duty on their components that runs to 31 December 2027. The equivalent exemption for fully imported (CBU) electric vehicles was legislated to run only to 31 December 2025. Both windows have been extended more than once, so confirm the position that applies to your purchase date with MITI or RMCD before treating an EV quotation as duty-free.

That exemption is why some EVs undercut petrol cars of similar size here even though their underlying production cost is higher — they are being compared against rivals carrying 75% to 105% excise duty. It also means an EV's price is unusually sensitive to policy: when an exemption lapses, the sticker moves immediately. Road tax is a separate matter and is dealt with in the road tax guide — EVs moved to a kilowatt-based schedule from 1 January 2026.

What to do with this when you are buying

• You cannot negotiate the tax, only the margin. The duty component of an on-the-road price is fixed by gazette, so discount talk only ever touches the distributor and dealer layers sitting on top of it.
• Treat 1,800 cc and 2,000 cc as price cliffs. Two cars of similar real-world performance either side of a band line can differ by thousands in excise duty and again in annual road tax — the same reason so many Malaysian cars are 1.5 litres.
• Compare on-the-road with insurance, not 'price from'. The headline figure often excludes registration, number plate, the first year's road tax and insurance, which together add a meaningful amount before you drive away.
• Remember you finance the tax too. Hire purchase lends against the whole on-the-road price, so you pay interest on the duty as well as on the car. On the RM94,440 of tax in the example above, a 3% flat rate over nine years adds roughly RM25,500 of interest — on the tax alone.
• Shorten the tenure before you shrink the car. Because flat-rate interest is charged on the original principal for the full term, cutting a nine-year loan to seven saves more than most buyers expect. Model it in the calculator below before you sign.

Important caveats

Excise rates come from the Excise Duties Order and import duty rates from the Customs Duties Order; both are set by gazette and can be amended in any budget cycle, and body-type classifications carry their own schedules that differ from the saloon bands above. The figures here are the long-standing published rates and are given to show how the stack compounds, not as a quotation.

The OMV used in the worked example is illustrative. Customs determines the actual OMV for each model and does not publish it, so no one outside RMCD and the distributor can reconstruct a specific car's duty exactly. Anyone offering you a precise 'tax-free price' for a particular model is estimating.

This is general information on how vehicle taxation is structured, not advice on a specific purchase or import. For a particular vehicle, confirm the duty position with RMCD and the AP position with MITI before committing.