Sime Darby Motors may need to raise car prices following 2% service tax hike in March – reports

In Budget 2024, the Madani government announced a 2% service tax increase from 6% to 8%, and it will start on March 1. Exemptions include services for food and beverage, telecommunications, vehicle parking and logistics; but expect to see the tax hike in areas such as vehicle servicing, which has labour charges.

It may be just a service tax increase and not an overall sales and service tax (SST) hike, but car prices might go up as well, in tandem with the overall cost of doing business. At least that’s the case for the Sime Darby Group, reported by The Edge.

According to group CEO Datuk Jeffri Salim Davidson, Sime Darby – which motors division is a distributor and/or dealer of brands such as BMW, BYD, Ford, Hyundai, Jaguar, Land Rover, MINI, Volvo and Porsche – is expected to increase car prices in Malaysia. Sime Darby also recently became the majority shareholder of UMW Toyota Motor (Toyota and Lexus) and Perodua via a takeover of UMW.

According to the report, Jeffri said Sime Darby will treat the tax rate increase, which will be applicable to all other automotive players as well, as part of its cost of doing business. However, the increase won’t be a flat 2% as there are many factors involved.

“In theory, yes [car prices will increase]. But the car price is set depending on competition, so it won’t exactly be 2%. And then we have other factors that come into play. So, it’s difficult to say exactly that car prices will go up by 2%,” he told the media on Wednesday.

This is an example of prices indirectly affected by a seemingly unrelated tax, as the overall cost of doing business increases and companies seek to maintain their margins. Speaking of higher prices, there’s also the high value goods tax (HVGT) and fuel subsidy rationalisation to ‘look forward to’ this year.

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