Do You Know The Difference Between CBU And CKD Car Models?
With the announcement early this year that the SST exemption for cars will be extended till June 30th 2022, many of you might be thinking that now is the right time for you to replace your car.
But as with making almost every major purchase, there are so many factors for you to consider and deliberate upon.
Often, when you are thinking of buying a new car or are reading up information about your dream car, you may have encountered terms like “CBU” and “CKD”.
What do they actually mean? Generally, CBU (Complete Built-Up) and CKD (Complete Knocked-Down) are terms that are used to describe the way of importing a vehicle into a country.
CKD vs CBU:
What does CBU mean?
In the most literal sense, CBU stands for Complete Built-Up cars. Essentially, this means that CBU cars are made in foreign countries, and are imported into Malaysia as fully operating vehicles.
Usually, imported CBU cars can command a very high excise duties, ranging from 60% – 105%, which will increase the final price of the cars.
Another fee that you will have to pay if you’re getting a CBU car is the import duty. The import duty comes from a Most Favoured Nation (MFN) tax, which is set at 30% for all World Trade Organization (WTO) member nations.
However, thanks to a pact called the ASEAN Free Trade Agreement (AFTA) and ASEAN Trade In Good Agreement (ATIGA), cars imported from other ASEAN nations do not carry with them any import duties, which means that there are CBU cars that can be purchased without paying import duties.
As mentioned at the start of the article, if you purchase your car before 30th June 2022, the SST for your purchase will be waived.
What does CKD mean?
If CBU are for cars that are imported into Malaysia as a fully assembled, operational vehicle, CKD is the other way around.
CKD stands for Completely Knocked Down (CKD), which means that the car was completely assembled in a local manufacturing plant. This allows CKD car models to qualify for government benefits and incentives, as well as exemption from excise duties.
This means that CKD models are usually a lot cheaper than CBU models.
The price difference
The biggest and most obvious difference between CBU and CKD units is the pricing. The 20% difference in import duty 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 kept in such a manner because CBU does not create as much revenue and employment opportunities for their target country (in this case, Malaysia).
On the other hand, a CKD assembled in the target country requires technology, infrastructure and labour investment that generates business and employment opportunities in the target country. It is for this reason that CKD is encouraged.
Unfortunately, manufacturers rarely offer both CBU and CKD versions of the same models of their cars at the same time. For instance, the CKD model of the Mazda CX-5 was only available in Malaysia about a year after the release of its CBU model.
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. Although there are some differences in specifications between the two, such as the materials used, finishing and workmanship, they are often minor. However, some drivers who insist on paying more for a CBU unit maintain that there is a discernible difference in build quality from 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 certain exceptions to the rule.
For instance, not all CBU cars come with a 30% tax. As mentioned above, because of the ASEAN Free Trade Area (AFTA) and the ASEAN Trade in Goods Agreement (ATIGA), there is no import duty on a CBU vehicle produced in an ASEAN country.
Also, while it is commonly held that a CBU vehicle is completely manufactured and assembled in its country of origin, this is not always the case. For example, some CBU models from Honda and Toyota that are 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 come out cheaper than a CKD unit, though that is not always the case. Therefore, it is important to always ask your dealer where your car was assembled before you decide to make a purchase.
Patience is a virtue
This is especially true if you’re keen on buying an imported car because new models of foreign cars are usually released as CBU first. The CKD version will usually only be available in the market after around a year, often replacing the earlier CBU unit.
In addition to the import duty, local taxes are also imposed according to engine capacity. Local taxes consist of excise duties and sales tax. Generally, the larger the engine capacity, the higher the taxes imposed.
Here’s a simple table to help you see just how much duties and taxes you might need to pay;
|Import duties||Local taxes|
|Engine capacity (CC)||Most Favoured Nation (MFN)||ASEAN ATIGA||Excise duties||Sales tax (SST)|
|1,800 – 1,999||30%||0%||80%||10%|
|2,000 – 2,499||30%||0%||90%||10%|
Although car prices are considered to be expensive in Malaysia due to the high taxes and excise duties on foreign made cars, this has not deterred Malaysians from continuing to buy cars.