Starting April 1st, Malaysia will impose a consumption tax of 0.40 Malaysian ringgit per milliliter on electronic cigarette liquid or gel containing nicotine, under the 2023 Federal Government Gazette Consumption Tax (Amendment) Order.
On April 3rd, HLIB Research, a Malaysian investment bank, expressed optimism about the government's regulatory measures on the electronic cigarette industry. This is because it allows BAT Malaysia to launch its electronic cigarette product, Vuse, and generate more revenue.
At the same time, utilizing the growing e-cigarette market, BAT has the opportunity to expand its market share by launching the Vuse brand.
However, Vuse's success in the Malaysian market is influenced by two factors: a. the abundance of existing e-cigarette products; b. the increase in e-cigarette oil prices due to the implementation of consumption tax, which worsens the formation of the illegal market.
Based on the overall cost shift, a 60ml bottle of e-cigarette liquid containing 12mg of nicotine is currently sold online for around 50 Malaysian ringgit (approximately 78 yuan in Chinese currency) and may increase in price to 74 Malaysian ringgit (approximately 115 yuan in Chinese currency), which is a 48% increase. Such price hikes are likely to push consumers towards illegal markets.
In 2015, Malaysia increased its cigarette consumption tax by 42%, raising the price per pack from 28 sen (approximately RMB 0.44) to 40 sen (approximately RMB 0.62). This resulted in a rise of the illegal market share from 33.8% in 2015 to 63-64% in 2018. Therefore, it remains to be seen if Vuse can successfully enter the Malaysian market.
Reference(s):
According to a research report from HLIB Research, regulation on vaping may lead to an increase in revenue for BAT Malaysia's Vuse and generate additional income.
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