International Trade and Industry Minister Mustapa Mohamed announced today that the import duties on cars from Japan and Australia would be phased out gradually by 2016 but it won't bring much cheer to the man in the street.

This is because the import duty only applies to fully-imported cars, which are generally luxury cars.

NONE More affordable foreign cars are assembled locally, and are only required to pay excise duty - a tax which Pakatan Rakyat has vowed to abolish (right) .

When asked if the government has a similar plan to reduce excise duty, Mustapa said such a plan is being studied.

Speaking during a media briefing on the reduction of import duties, he also denied the car price in Malaysia is among the highest in the world.

"That is not correct. As for the (reduction of) excise duty, it needs to be done, we have been studying it and it is still in the progress," he said.

Coincidence

He added that the reduction of car duties has to be done gradually as it would directly and indirectly impact a million people related to the industry.

NONE "It's about jobs, ten of thousands people working in this industry. You have to manage (this) carefully," he said.

Asked whether the announcement today was a response to Pakatan's manifesto (left) , Mustapa replied in the negative, stating that it was merely a "coincidence".

"It has nothing to do with Pakatan. We have signed the Free Trade Agreement (FTA) with Japan and Australia in 2006 and 2012 respectively," he said.

The FTA with Japan and Australia required the abolishment of import duties by 2016.

Impact of FTA?

Mustapa said that the government has also signed similar agreements with Asean countries, which required import duties to be eliminated in 2010.

NONE "Further reduction in prices will be realised with the liberalization of the automotive industry through the other FTAs implementation which will come into force in 2016," he said, adding that this is one of the contributing factors to the reduction of car prices beginning last quarter of 2012.

Speaking to reporters later, Malaysian Automotive Association president Aishah Ahmad, offered a different opinion.

“At the end of last year, a lot of companies reduced their car prices because they want to gain market share as well as to increase their volumes.”

She said it was the market forces and not the FTA which contribute to the reduction of car prices.

However, she noted that the FTA also cover the reduction of import duties on the car component part, which she believes would benefit local assemblers.

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