GST Accessories and parts

Apparently, the Trans-Pacific Partnership Agreement (TPPA) doesn’t just have the potential to reduce Malaysian car prices, but could also benefit automotive parts and components manufacturers, if a report by The Sun is to be believed.

Malaysian Automotive Institute (MAI) CEO Datuk Madani Sahari told reporters yesterday that a total of RM10 billion worth of parts and components are exported out of Malaysia every year – a performance that, he said, could be bettered through the implementation of the agreement.

“It has been an increasing trend as it only used to be RM5 billion before. We just have to do more and believe in ourselves…why can’t we double that export value in five years?” Madani said.

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He added that Malaysia’s automotive players could tap into the markets of other TPPA-bound countries, under the agreement’s provisions concerning the rules of origin. “For vehicles that exported within TPPA countries, they must meet the rules of origin of 55%, meaning the parts and components must be coming from TPPA countries.

“Malaysian suppliers not only have the opportunity to supply to OEMs (original equipment manufacturers) within the country, but also to TPPA countries, especially the top four countries that produce cars – namely the US, Japan, Canada and Mexico,” he said.

Not only that, Madani also believes that Proton and Perodua could also access other markets under the TPPA, due to the preferential tariff rates of member countries. “But provided they must be competitive in terms of their base cost – that’s why the strategic direction of National Automotive Policy (NAP) is about enhancing competition,” he added.

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Madani also said that it’s not too late for the country to establish its footprint in the regional automotive industry through its Energy Efficient Vehicle (EEV) policy, despite Thailand being the automotive hub for the ASEAN region. He contended that there are still many more carmakers that focus on fuel efficiency and low carbon emissions, which have yet to penetrate the ASEAN market.

Moreover, Madani said that thanks to the liberalisation of the automotive industry through the NAP, Malaysian car prices will be largely influenced by market forces in the future. He claimed that the average car prices of 400 variants are now 12.7% lower in the first quarter of this year, compared to 2013.

However, Ministry of International Trade and Industry (MITI) deputy secretary-general of strategy and monitoring Datuk J Jayasri said that he could not guarantee that car prices will be cheaper after the implementation of TPPA. “By right, if [there are] no changes in excise tax and when import duty comes down, you should see a 30% drop in car prices provided there is no exchange rate fluctuation,” he said.