Malaysian auto assemblers hoping for gov’t support in the form of tax breaks, export incentives – report

Malaysian auto assemblers hoping for gov’t support in the form of tax breaks, export incentives – report

Budget 2018 will be tabled next month, and business publications will do the usual wish list hunting. What do the captains want for the automotive industry? Here’s a small sampling, compiled by The Edge.

Barring a few on-form brands bucking the trend, auto sales in Malaysia and consumer sentiment have not been the most rosy of late, and Edaran Tan Chong Motor (ETCM) is one of the more affected companies. The long-time Nissan distributor and assembler has been hit not just by declining sales, but the depreciation of the ringgit as well.

ETCM’s executive director Datuk Dr Ang Bon Beng says the forex situation “severely affects our bottom line” and his company’s wish list for the upcoming Budget 2018 is for the government to extend “special financial packages” to help automotive players stay in the black.

“As the auto sector is a key contributor to the country’s tax revenue, we seek the government’s support by providing special financial packages, for example, in the form of higher industrial linkage ratio, which is higher tax exemption for localisation, or reducing the excise duties,” Ang said.

Malaysian auto assemblers hoping for gov’t support in the form of tax breaks, export incentives – report

Industrial linkage ratio is a form of tax rebate given for the localisation of content. The current ratio is 1:1, which means that the rebate corresponds directly to the cost of parts localised. ETCM’s Ang hopes that the ratio can be doubled.

According to MIDF Research, Tan Chong is estimated to have around 80% exposure to USD imports (of total import cost), with the rest in Japanese yen. This high exposure impacts the company greatly – every negative 1% change in RM-USD rates affects FY18 earnings by 16%. The company, which has had steady earnings over the decades, is currently loss-making. This situation ties in with the wish list.

Bermaz, the distributor of Mazda vehicles in Malaysia and the Philippines, has been faring better, but still reported 50.8% lower net profit (RM20.2 million) for its first quarter ending July 31. The company has a different set of concerns from Tan Chong – compliance with energy efficient vehicle (EEV) standards and exports are what it cares about.

“Our wish for Budget 2018 is for the government to push lower-priced cars to be EEV-compliant, instead of offering incentives to premium hybrid manufacturers, who don’t help the domestic automotive industry much without any large CKD (completely knocked down) volumes,” said Bermaz executive director Datuk Francis Lee Kok Chuan, who highlighted that all Mazda models except for the BT-50 pick-up truck are EEVs.

Malaysian auto assemblers hoping for gov’t support in the form of tax breaks, export incentives – report

Lee was without a doubt taking aim at Mercedes-Benz and BMW, both of which sell locally assembled plug-in hybrid models in small volumes. He suggested that more incentives be provided for “those who genuinely export cars from Malaysia to support the industry and help transform the country into an automotive hub in the region.” Volvo makes PHEVs in Malaysia too, but does export the XC90 T8 Twin Engine to Thailand.

Aside from domestic consumption, Mazda Malaysia – a 70:30 joint venture between Mazda Motor Corporation and Bermaz – produces CX-5 SUVs in Kulim for export to several markets in ASEAN, including Thailand.

“The challenge for exporters like ourselves is to bring costs down, in order to be competitive for the export markets. The regional markets are very competitive with so much protectionism by various countries,” Lee added.

Will we see incentives for the auto industry in Budget 2018? Unlikely. “Policies and incentives for the automotive industry are [usually] announced via the National Automotive Policy and not the budget. Nevertheless, any budget proposal which boosts consumer sentiment and improves Malaysians’ disposable income will support car sales,” Ang said.

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Danny Tan

Danny Tan loves driving as much as he loves a certain herbal meat soup, and sweet engine music as much as drum beats. He has been in the auto industry since 2006, previously filling the pages of two motoring magazines before joining this website. Enjoys detailing the experience more than the technical details.

 

Comments

  • Not necessarily all savings will pass to consumers. Look at the recent BMW 5 series CKD. I don’t know what’s the point other than maximize more profits.

    Like or Dislike: Thumb up 27 Thumb down 0
    • thepolygonal on Sep 25, 2017 at 4:41 pm

      Gomen prefers high duties & excise duties to force pipu use public transportations.

      Like or Dislike: Thumb up 24 Thumb down 18
      • Fully agree. Lets make it a gr8 success!

        Like or Dislike: Thumb up 21 Thumb down 20
        • Camrysai on Sep 26, 2017 at 10:55 am

          Gov gips bailout loan so no problemo. P1 did it, TC can do it!

          Like or Dislike: Thumb up 6 Thumb down 3
          • P1 at least innovated.
            ETCM went backwards.
            So why gov need to gip TC?

            Like or Dislike: Thumb up 0 Thumb down 2
    • William on Sep 25, 2017 at 5:24 pm

      Whose fault Ringgit has dropped so much?

      How come Singapore, with no resources can have SGD 3.3 to Ringgit?

      Both countries started same time Merdeka. One is first world with highest GDP per capita whilst another is 3rd world with super low GDP per capita.

      3 more years we become First World 2020.

      Like or Dislike: Thumb up 37 Thumb down 4
      • Rightwinger on Sep 25, 2017 at 7:34 pm

        Sorry bro, Malaysia and Singapore never did part ways on equal footing. World bank data reveals that Singapore’s GDP/capita in 1965 was USD516.29 Vs Malaysia at USD310.328 while most of East Asia and Pacific countries were at USD197.86. Simply put that while in 1965 Singapore was poor by today’s standards, it was already significantly better off than most of its Asian neighbors.

        Like or Dislike: Thumb up 9 Thumb down 1
        • Simply put, in a 100m race, they started at 50m distance while we shafted to 70m. Not even Usain Bolt can make up the diff.

          Like or Dislike: Thumb up 3 Thumb down 4
          • Monorel on Sep 26, 2017 at 12:03 pm

            Singapore’s GDP/capita in 1965 was USD516 Vs Malaysia at USD310.

            Singapore’s GDP/capita in 2016 is USD52k Vs Malaysia at USD11k. 5times richer…

            Like or Dislike: Thumb up 6 Thumb down 1
          • Rightwinger on Sep 26, 2017 at 1:10 pm

            So true, but haters prefer myths over facts…

            Like or Dislike: Thumb up 2 Thumb down 0
          • Rightwinger on Sep 26, 2017 at 2:52 pm

            Chew on this: Malaysia has built >70,000KM of roads, not including tolled highways, since Merdeka. Singapore on the other hand has, up to 2014, 3500KM of roads built up. That’s just roads. We’ve had to build much more than just roads since then compared to Singapore.

            Like or Dislike: Thumb up 0 Thumb down 0
          • Keyword : Quality. Not kuantiti

            Like or Dislike: Thumb up 1 Thumb down 0
      • A just concluded RCI alredi answers all ur Q

        Like or Dislike: Thumb up 4 Thumb down 2
      • When talk about GDP, talk also about spending.

        Like or Dislike: Thumb up 0 Thumb down 0
      • kzm (Member) on Sep 26, 2017 at 12:38 pm

        As far as i know Boleh GDP is at the middle not high not low either.

        Like or Dislike: Thumb up 1 Thumb down 0
    • YB Albert on Sep 25, 2017 at 6:39 pm

      The problem with Tan Chong is…lack of EXCITING new models.
      The Almeira,Livina…all outdated ancient T Rex dinasaurs.
      They have discontinued Sylphy,which cant sell.
      The xtrail and Teana are current models but r inthe Rm150k + range.
      All car distributors have the same declining ringgit problem.
      HOw come Honda Malaysia is making tons of money and growing sales amidst a recessing economy,where more people are losing their jobs?
      Dr.Ang…u need not have a PHD in rocket science to understand this matter regards yr declining sales.

      Like or Dislike: Thumb up 11 Thumb down 0
  • Dream on~

    Like or Dislike: Thumb up 8 Thumb down 0
  • look at india tax so much to rakyat, why still complain here.

    Like or Dislike: Thumb up 2 Thumb down 19
  • With P1 now in private hands and gov fully concentrating to moving masses via public transports, what benefits is there for gov to help them anymore?

    Like or Dislike: Thumb up 12 Thumb down 8
    • William on Sep 25, 2017 at 5:15 pm

      They and you have been saying Proton is in private hands the past 6 years. So how come Government is using our billions to fund Proton?

      Like or Dislike: Thumb up 13 Thumb down 12
    • john's father on Sep 25, 2017 at 7:07 pm

      Agree. Let’s get rid of import tariffs.

      Proton and Perodua will sink or swim against the tide.

      Like or Dislike: Thumb up 1 Thumb down 1
    • Righteous on Sep 26, 2017 at 1:07 pm

      Proton should stand on its own without any tax concessions

      Like or Dislike: Thumb up 1 Thumb down 0
  • Geng Cukur on Sep 25, 2017 at 5:05 pm

    Oh…kita amat syukur……….dengan adanya bantuan insentif dari kerajaan , syarikat automatif Malaysia MAMPU menembusi pasaran automotif serantau dan seterusnya menakluki kuasa besar dunia

    Like or Dislike: Thumb up 3 Thumb down 5
  • and who’s to blame for the depreciation of the ringgit?

    Like or Dislike: Thumb up 13 Thumb down 16
    • And who’s to blame for the record breaking export figures… oh wai

      Like or Dislike: Thumb up 16 Thumb down 15
  • William on Sep 25, 2017 at 5:20 pm

    The BMW CKD and CBU 5 series got no difference cause….see who owns BMW. Sime Darby. And Sime Darby is GLC.

    Government wants to untung more

    Like or Dislike: Thumb up 12 Thumb down 3
  • Normal Guy on Sep 26, 2017 at 5:56 am

    Tan Chong asking for change? That’s funny because many employees there are asking for change and got none. Annual loss of RM55mil? Good luck turning it around. Great bunch of people working there, same thing don’t apply to their management. The current predicament is their own doing.

    Like or Dislike: Thumb up 4 Thumb down 0
  • Sukahati lu loh... on Sep 26, 2017 at 2:55 pm

    Who cares la…ppl nowadays use MRT wei..cepat murah selamat..k

    Like or Dislike: Thumb up 3 Thumb down 1
 

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