We outline how the July 1, 2025 expansion of the SST regime sits alongside the unchanged 10% vehicle sales tax and existing service levies. You will see what this means when you buy or operate a vehicle this year and how overheads could shift for dealerships.
Our analysis shows the broader tax reach is unlikely to hit the automotive sector directly. Research and industry forecasts point to resilient demand in the sub-RM100,000 segment and modest rental cost effects for showrooms.
We also flag key risks and windows for action. The planned removal of the RON 95 fuel subsidy in H2 could nudge consumers toward efficient models and speed EV uptake. Full duty incentives for imported EVs may end by year-end, which could compress buying decisions into Q4.
Key Takeaways
- The SST expansion coexists with a 10% vehicle sales tax and current service levies.
- Direct impact on the automotive sector is expected to be limited; indirect overheads rise slightly.
- Demand looks strongest for vehicles priced under RM100,000; national brands may lead.
- Fuel subsidy removal in H2 could accelerate EV interest and shift buyer preferences.
- EV duty incentives ending by Dec 31, 2025 may create a Q4 demand spike to monitor.
What’s changing on July 1, 2025: Expanded SST and the immediate effect on the automotive sector
Starting July 1, 2025, the expanded sales service tax framework takes effect, but headline purchase levies remain steady. The 10% sales tax on vehicle purchases is unchanged, so invoice calculations for new cars stay familiar.
Routine ownership costs also remain clear. Maintenance and repairs continue to carry an 8% service tax, while consumables such as tyres retain a 5% rate. This avoids sudden jumps in running prices for most buyers.
For dealerships and suppliers, broader SST coverage may nudge rental and overhead lines upward in some locations. Research suggests the net financial effect at sector level will be marginal.
- Separate direct tax changes from indirect cost pass‑throughs when modelling margins.
- Use stable tax rules to time purchases on inventory and finance terms rather than tax deadlines.
- Verify billing codes, tighten service menus, and train front‑line staff to explain tax line items clearly.
We recommend monitoring consumer sentiment, especially as fuel subsidy moves approach, and communicating total cost of ownership to sustain buyer confidence in Malaysia.
sst exemption car malaysia: How the policy works now versus the 2020-2022 exemptions
We compare the present sales and service tax rules with the Penjana reliefs to show what buyers and dealers face today.
From Penjana to present
During 2020–2022, the Penjana stimulus granted a 100% sst exemption for CKD passenger vehicles and a 50% relief for CBU imports, covering MPVs and SUVs. Those measures were extended several times and ended on June 30, 2022.
What stays taxed in 2025
Today, the 10% sales tax at purchase remains in force. Maintenance and repairs carry an 8% service tax, while consumables keep a 5% rate.
Sales vs service tax explained
Sales tax applies at the point of sale to the vehicle transaction value. Service tax applies during ownership for maintenance, repairs and consumables.
- Sales tax affects the sticker and on‑the‑road quotation.
- Service tax adds to running costs over the vehicle lifecycle.
CKD, CBU and OMV/excise duty considerations
Local assembly (ckd) still offers pricing advantages in some models through content and timing. CBU pricing can carry higher import inputs and longer lead times.
Policy discussions since 2022 noted that broader OMV inputs—engineering, royalties and licensing—could raise taxable value and push on‑the‑road prices 8%–20% if applied without an extension.
Dealerships and practical actions
Research expects only minimal rental and overhead increases from the expanded sales service tax coverage, so margin structures are likely intact with active cost control.
- Validate invoice tax mapping and CKD proofs.
- Monitor OMV and excise updates when assessing quotes.
Impacts for buyers and businesses in Malaysia: prices, vehicle sales, and strategy for 2025
We use two demand anchors to set planning ranges and trigger points for the year. The MAA projects 780,000 units while independent research forecasts 760,000 units. These figures let you model staffing, inventory and marketing to both base and downside scenarios.
Market outlook and TIV
Total industry volume (TIV) sits between the two projections. We recommend weekly monitoring of units, cancellations and model velocity to spot early shifts.
Price sensitivity by segment
Price elasticity is highest below RM100,000. National brands—around 64.5% market share—will likely convert traffic. Entry-level Japanese models should compete on financing and bundled services to protect margins.
EVs in focus
Full duty exemption for imported EVs is expected to end on December 31, 2025, which may create a Q4 demand spike. Allocate EV units, charging packages and incentives accordingly.
- Optimize mix over volume; emphasize total cost of ownership and service bundles.
- Plan targeted campaigns around model-year changeovers and stock arrivals.
| Scenario | TIV (units) | Key action |
|---|---|---|
| MAA baseline | 780,000 | Maintain stock, focus on throughput |
| Independent forecast | 760,000 | Reduce promos, protect margins |
| EV window | Allocation focus in Q4 | Bundle charging + finance offers |
Conclusion
Final takeaway, we see limited immediate effect on headline prices because the 10% sales tax and routine service levies remain unchanged. Demand, incentives and model timing will drive shifts more than a sudden tax shock.
For buyers, focus on financing, model selection and on‑the‑road value. Consider CKD options where value is clear and verify final car prices across trims before you commit.
For companies, align showroom staffing, after‑sales service readiness and inventory to the expected units range. Watch the EV duty window and government signals for any extension that could alter Q4 dynamics.
FAQ
What is changing on July 1, 2025, and how will it affect vehicle prices?
From July 1, 2025 the government broadened the scope of the sales and service levies on passenger vehicles. Buyers can expect a clearer split between a 10% vehicle sales duty applied at point of sale and an 8% service levy on maintenance plus smaller levies on consumables. Immediate effects will be upward pressure on retail prices, with the largest impact on higher-value models and those reliant on imported components.
How does the current policy differ from the 2020–2022 relief measures?
Earlier relief programmes granted full relief for locally assembled (CKD) units and partial relief for fully imported (CBU) models. The current framework removes most of those blanket discounts. Instead, taxation now applies uniformly by sales and service categories, while some targeted concessions for electric vehicles and selected local production schemes remain time-limited.
Which taxes still apply in 2025 and what do they cover?
The main levies for 2025 are a 10% vehicle sales duty charged at point of purchase, an 8% service levy on maintenance and repair services, and smaller percentage charges on consumables. Import-related costs such as open market value, excise duties, and customs can still affect final retail pricing for certain models.
What is the difference between sales duty and service levy for buyers?
The sales duty is a one-time fee added to the purchase price of a vehicle. The service levy applies to ongoing spend: workshop labour, scheduled maintenance and repair invoices. Buyers therefore feel the sales duty immediately at purchase, while the service levy increases lifetime ownership costs.
How do CKD and CBU classifications affect pricing now?
Locally assembled (CKD) models generally retain cost advantages through local content and lower import duty exposure, while completely built-up (CBU) imports face higher landed costs tied to OMV and excise duties. Those upstream charges still influence retail pricing even with the new sales and service framework.
Will dealership overheads significantly push prices higher?
Research suggests dealership fixed costs and rental pressures may increase operating expenses, but most studies expect the direct pass-through to consumers to be limited. Dealers are likely to absorb a portion to stay competitive, though minor retail price adjustments are probable.
What is the market outlook for total industry volume (TIV) in 2025?
Industry forecasts vary. The Malaysian Automotive Association projects around 780,000 units, while independent research estimates roughly 760,000 units. Expectations reflect cautious consumer demand, with price sensitivity and credit conditions determining the final outcome.
Which vehicle segments are most price-sensitive under the new rules?
Entry-level and sub-RM100,000 segments show the highest sensitivity. National brands and affordable Japanese models commonly target these buyers and may see stronger demand softness if manufacturers pass through full tax increases. Premium and luxury segments are less price elastic but face larger absolute tax increases.
How are electric vehicles treated and what is the timeline for duty relief?
Electric vehicles currently benefit from selective reliefs on import and excise charges that remain in effect until December 31, 2025. That window may create a fourth-quarter demand surge as buyers and fleet operators accelerate purchases to secure lower total cost of ownership.
What steps can businesses take to mitigate higher costs in 2025?
Companies should review fleet procurement timing, negotiate maintenance contracts that factor service levies, and consider total cost of ownership analyses when choosing between CKD and CBU options. Leasing and fleet-management strategies can also smooth cash flow and tax exposure.
How should individual buyers plan their purchase given the policy changes?
We recommend comparing landed prices across local and imported models, factoring in expected maintenance spend and the new service levy. If you are flexible on timing, consider the EV relief window or waiting for promotional pricing as manufacturers adjust to the new regime.
Where can we find authoritative updates on rates and implementation details?
Official notices from the Ministry of Finance and the Royal Malaysian Customs Department provide final rate tables and implementation guidance. Industry bodies such as the Malaysian Automotive Association also publish market-impact analyses and sales forecasts.
Disclaimer:
The information shared in this post is for general educational and reference purposes only. It does not constitute professional advice. Regulations and requirements may change from time to time. For guidance specific to your situation, please consult with our firm or a qualified professional.
