small_maa_logo.jpgThe automotive market has been growing for the past 8 years, but has slowed down this year. Reasons for this slowdown was quoted to be more stringent hire purchase requirements and the rising fuel costs. The new NAP also brought resale value of old cars down, discouraging sales because owners prefer to keep their old cars rather than sell them at a low price and buy a new car.

As you all know, I watch the local media everyday to monitor new developments in the car industry. Both you and I have read news that hint of an upcoming possible vehicle scrapping policy. I’ve wanted to write about it for quite some time now, but posts like this take time to think out and I did not have the time. But reading this, I cannot wait anymore.

This is the MAA’s solution to boost vehicle sales in Malaysia, to ensure further growth:

  • Scrap used vehicles over a certain age
  • Less stringent financing
  • Export used cars
  • Incentives
  • Tax rebates

What incentives are we talking about? MAA president Datuk Aishah Ahmad hopes that the 2007 Budget would provide some measures to improve sales such as introducing a policy to scrap used vehicles and less stringent financing facilities. The Federation of Motor and Credit Companies Association of Malaysia has proposed to the government to offer a RM5,000 voucher to car owners who scrap their cars voluntarily. This voucher cannot be exchanged for cash, but can only be used to purchase a NEW vehicle. Cars more than 10 years old should also be scrapped.

Another proposal would be to export vehicles over 10 years old overseas. A tax refund of the original vehicle excise and import duty could be given as an incentive, in addition to the body value of the car when exported. There could also be a tax rebate to purchase a new car, specifically locally assembled and national cars.

I have a friend who constantly complains daily about how expensive it is to even afford a car like a Perodua Kelisa. Look around you. There are plenty of old cars on the road running well. My father drove a 1984 Nissan Sunny 130Y his whole life, and I am still using it now. My Proton Satria was involved in an accident which deemed it a total loss, and scrap value was only a little more than RM1,000. Together with the RM5,000 voucher that MAA proposed, I’d rather continue driving my 22 year old Nissan Sunny than get a measely RM6,000 to so-called help me buy a new car.

Where is the choice? There are people like me who prefer buying a second hand car so much more than a first hand car. I do not feel any need the smell of a new car. Why not let someone else take care of the depreciation? My Proton Satria was already 9 years old when I acquired it, and earning low wages I had to take a 5 year loan for it. Which means by the time I finished paying the loan, it would already be 14 years old!

What about older folks who are retired and still go around in their old Toyota Corollas? Having retired, I don’t think they can afford replacing their old reliable run-about with a new car. And what about sentimental value? And classics?

How do you scrap cars when it’s so hard to own cars here in the first place. You already toil to pay off a car loan in ridiculous lengths of 7 to 9 years. If cars had to be scrapped at the 10th year of age, the depreciation rate of cars would also go at a very much accelerated rate, approaching almost no value at the 10th year. What if you total you car half way thorugh the loan repayment. The insurance company would reimburse you based on current value. How are you supposed to repay the huge amount of money you still owe the bank?

This is not stimulating the market, it’s more of creating a captive market for new cars. And captive markets are always bad. Outrageous. We are not all rolling in cash okay? Don’t force your new cars down our throats!

How do you think this current glut in the new car and 2nd hand car market should be solved?

Related Posts:
Car Scrapping Policy – 15 years? (31/08/2006)