With the announcement earlier this year that the SST exemption for cars will be extended until June 30, 2022, many of you might think now is the time for you to replace your car.
But as with almost any major purchase, there are many factors to consider and deliberate.
Often when you are considering buying a new car or reading about your dream car, you may have come across terms such as “CBU” and “CKD”.
What do they actually mean? Generally, CBU (Complete Built-Up) and CKD (Complete Knocked-Down) are terms used to describe how to import a vehicle into a country.
CKD versus CBU:
What does CBU mean?
In the most literal sense, CBU stands for Complete Built-Up cars. This basically means that CBU cars are manufactured in foreign countries and are imported into Malaysia as fully operational vehicles.
Usually, imported CBU cars may incur very high excise duty, ranging from 60% to 105%, which will increase the final price of the cars.
Another fee you will have to pay if you buy a CBU car is import duty. The import duty comes from a Most Favored Nation (MFN) tax, which is set at 30% for all World Trade Organization (WTO) member countries.
However, thanks to a pact called the ASEAN Free Trade Agreement (AFTA) and the ASEAN Trade In Good Agreement (ATIGA), cars imported from other ASEAN countries are not subject to import duties, which means that there are CBU cars that can be purchased without paying import duties.
As mentioned at the beginning of the article, if you buy your car before June 30, 2022, the SST for your purchase will be removed.
What does CKD mean?
If CBU relates to cars imported into Malaysia as a fully assembled operational vehicle, CKD is the reverse.
CKD stands for Completely Knocked Down (CKD), meaning the car was fully assembled at a local manufacturing facility. This allows CKD car models to qualify for government benefits and incentives, as well as excise duty exemption.
This means that CKD models are generally much cheaper than CBU models.
The price difference
The biggest and most obvious difference between CBU and CKD units is the price. The 20% difference in import duties will make a significant difference in your budget. On average, you can expect to save up to RM15,000 to RM20,000 on a CKD model.
The import duty structure is deliberately maintained in this way because CBU does not create as much income and job opportunities for its target country (in this case, Malaysia).
On the other hand, a CKD assembled in the target country requires investments in technology, infrastructure and manpower that generate business and employment opportunities in the target country. It is for this reason that the IRC is encouraged.
Unfortunately, manufacturers rarely offer CBU and CKD versions of the same models of their cars at the same time. For example, the Mazda CX-5 CKD model was not available in Malaysia until about a year after its CBU model was released.
Meanwhile, only about half of the models sold by BMW Malaysia are CKD units, while the rest are CBU units from Germany.
There have been debates about the difference in “build quality” between CBU and CKD vehicles. While there are some specification differences between the two, such as materials used, finish, and workmanship, they are often minor. However, some drivers who insist on paying more for a CBU unit argue that there is a noticeable difference in build quality compared to the CKD version.
Are there exceptions to the rule?
With a higher import duty, CBU units generally cost more than a CKD. However, there are some exceptions to the rule.
For example, not all CBU cars are subject to a 30% tax. As mentioned above, due to the ASEAN Free Trade Area (AFTA) and the ASEAN Trade in Goods Agreement (ATIGA), there are no import duties. import on a CBU vehicle produced in an ASEAN country.
Also, while it is commonly accepted that a CBU vehicle is entirely manufactured and assembled in its country of origin, this is not always the case. For example, some Honda and Toyota CBU models imported into Malaysia are assembled in Thailand.
The 0% import duty for CBU vehicles from ASEAN countries could mean that an ASEAN-assembled CBU would be cheaper than a CKD unit, although this is not always the case. Therefore, it is important to always ask your dealer where your car was assembled before deciding to make a purchase.
Patience is a virtue
This is especially true if you want to buy an imported car, as newer models of foreign cars are usually marketed first as CBUs. The CKD version will usually only be available on the market after about a year, often replacing the previous CBU unit.
In addition to the import duty, local taxes are also imposed depending on the engine capacity. Local taxes include excise duty and sales tax. Generally, the larger the displacement, the higher the taxes imposed.
Here is a simple table to help you determine the amount of duties and taxes you may have to pay;
|Import duties||Local taxes|
|Displacement (CC)||Most favored nation (MFN)||ASEAN ATIGA||Excise duties||Sales Tax (SST)|
|1,800 – 1,999||30%||0%||80%||ten%|
|2,000 – 2,499||30%||0%||90%||ten%|
Although car prices are considered high in Malaysia due to high excise taxes and duties on foreign-made cars, this has not deterred Malaysians from continuing to buy cars.
Make the best choice according to your needs thanks to our car loan calculator and our rate comparison.
Do you know the difference between CBU and CKD car models? appeared first on iMoney Malaysia.
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