Vehicle prices in Malaysia are expected to rise because of new motor tariffs, Trade Minister Rafidah Aziz said yesterday.

Malaysia, which is Southeast Asia's largest car market, has brought in a complex new tax structure that has seen some import tariffs cut but introduced excise duty, traditionally reserved for local products, for all imported cars.

Rafidah was quoted by the national Bernama news agency as saying that prices were likely to increase but said manufacturers could still cut prices if they were willing to reduce profit margins.

The Malaysian Automotive Association (MAA) president Aishah Ahmad was quoted as saying by the Malay-language Berita Minggu that car manufacturers were still calculating costs.

But vehicle prices are expected to increase because the benefits of lower import duty will be offset by the excise duties and the stronger yen and euro, eating into motor companies' profit margins, she said.

"From our initial analysis, prices are expected to increase," she told the newspaper.

"Many consumers have expressed their disappointment and they should rightly feel so because car prices in Malaysia are not only the highest among regional countries but the third highest in the world," she said.

She said prices for four-wheel drive models were likely to go up significantly and urged consumers to buy before the price hike.

Up to 3 percent more

The Sunday Mail said cars below 1,800cc may now cost two to three percent more, while prices for bigger models may increase by as much as 10 to 15 percent.

The new tax structure is part of Malaysia's plan to liberalise the auto sector under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta), where import tariffs for most products in the region were cut to below five percent over the last year.

Malaysia obtained a two-year reprieve for its auto industry until 2005 but it also said it would defer reducing duties until 2008, a move analysts said reflected deep-seated concerns over the survival of the local car industry. - AFP