GST: Lower car prices offset by expensive imported auto parts?

Prices for new cars are generally expected to come down by between one and three per cent after the implementation of the Goods and Services Tax (GST), but the gains could be offset by higher prices of imported auto parts due to foreign exchange factors. Auto components are mainly imported from Japan and if the yen appreciates against the ringgit, the savings of one to three per cent could be much less because the components would now cost more and that would affect retail car prices. Royal Malaysian Customs Department GST director, Datuk Subromaniam Tholasy said nobody knows what exactly the foreign exchange rate will be come December or January next year. "So, I will never say that car prices will go down. I don't know, nobody knows," he told Bernama recently. The GST that will come into effect on April 1, 2015 is supposed to bring down car prices by between one percent and three percent. "There is some savings but we must always remember, the biggest cost for car is not the tax component, i.e., GST, it is the foreign exchange rate. "Theoretically, the prices will come down, between one and three percent. But having said that, we must always remember, that's for new cars. "When new car prices comes down, what happens to the old car? It will even go down further next year. If you want to change (old car), you change this year. If you are going to change next year, probably it will be worse off, unless you are making a first purchase of new car," he added. The Sales and Services Tax (SST) of 10 percent will be abolished on April 1, 2015 and replaced with the GST which is set at six percent. In a previous report, Malaysian Automotive Institute (MAI) CEO Mohamad Madani Sahari said the implementation of the GST in 2015 should stimulate demand for vehicles with the reduction of prices due to the abolishment of the SST. He said the total industry volume (TIV) was better this year compared with last year driven by aggressive sales campaign by industry players. The TIV forecast for this year of 670,000 units has been revised downwards to 680,000 units. MAI reported that the TIV for the January to July was 11,490 units or three percent higher than the corresponding period in 2013.