The Malaysian government says a cut in excise duty for motor vehicles will not be part of the review of the national automotive policy now under way.

Malaysian International Trade and Industry Minister Mustapa Mohamed tells the House of Representatives a sudden reduction in excise duty would have a significant impact on government revenues. About RM7 billion ($2.3 billion) is estimated to be coming from excise duties annually.

The government’s Bernama news agency reports Mustapa also believes an excise cut would harm the overall growth of the domestic automotive industry.

“The government is aware that the domestic automotive industry has to be developed further to become more competitive and offer more benefits to the people, particularly in selling cars at a reasonable price,” he says.

Answering a question in the House, Mustapa says the government has made several important initiatives to reduce vehicle prices. These include the introduction of many car models in the same segment and issuing new manufacturing licenses for all segments in the energy-efficient-vehicles category.

“Although car prices in Malaysia are higher than in neighboring countries, after taking into account costs such as insurance, road tax and fuel, which are subsidized by the government, car price in Malaysia is actually lower than our neighbors,” Mustapa says.

He says the government plans a comprehensive strategy, including a roadmap to oversee staged reduction in car prices and will establish a National Automotive Council to monitor the implementation national automotive policy.

Several local auto makers, through consultation with the government, have committed themselves to lower prices, Mustapa says.

Local small-car maker Perodua offers a low monthly installment plan, a 50% cut on maintenance costs for two years, insurance incentives and free driving license, he says, while Honda, Volkswagen, Chevrolet and Ford are involved in a price-reduction drive through various schemes.

“I was informed that several companies have already offered incentives, while some are expected to make announcements on incentives to ensure that the people enjoyed lower car prices,” Mustapa is quoted as saying.