Thoughts on the National Automotive Policy

The new National Automotive Policy was released on the 22nd of March 2006. We’ve waited in anticipation for it for quite some time now. Most of us are primarily concerned on how it will affect us as consumers. Are our cars going to cost more or less now, and where are they going to come from, for those who prefer CBU models.

For the consumer

There has been some changes to the tax structures, both in terms of excise duty and import duty, so expect some changes in the prices of some models. So far Toyota has confirmed prices across the product range will be lower except for MPV models, and Perodua has announced price cuts across the product range except for the lowest end budget models. The ASEAN CEPT tax rate is now 5%, dropped from 15% previously. For a list of duty rates for importing a personal vehicle, please visit this link or this link.

Approved Permits will be phased out in stages and completely abolished in 2010. APs will also be issued only for limited amount of vehicles not available in Malaysia. Which makes me wonder if APs will still be issued for Hyundai and Kia vehicles that are already assembled locally like the Kia Carnival (Naza Ria), and Inokom Getz (Hyundai Getz). Some people would still prefer CBU versions of the Hyundai Getz. Would they still be able to buy one? It is also worthwhile to note that APs are being phased out because it is illegal under the World Trade Organisation regime.

Vehicle purchases will also have to go through a Vehicle Type Assessment (VTA), which ensures the road-worthiness of vehicles. More money for Puspakom perhaps, and forgive me for my pessimistic view on things but it would also mean more avenues for corruption to surface.

2nd hand car imports will also be reduced drastically in stages until a total ban is put into effect in 2010. The government’s rationale for this is so that locally manufactured and assembled vehicles demand will go up. There goes my plans to import a used reconditioned Toyota Altezza when I can finally afford it. IMHO, reconditioned cars are very good value. It is said that personal imports are still allowed, however I am not sure if you can import one straight anytime you want or you have to fulfill certain criteria like studying/working and owning the car in the country for a certain amount of time before being able to bring it back to Malaysia.

For the industry

I am slightly confused on how the government intends to promote Malaysia as a regional automotive hub. For one, it is stated that there will be no new manufacturing licenses issued until the current problem of overcapacity is resolved. The government also decides not to allow existing manufacturers to make available their excess facilities to third parties to assemble car models who compete directly with national car manufacturers. The Toyota Avanza which is currently assembled by Perodua at it’s plant in Rawang comes to mind. It is definitely a competitor to the Proton Waja as a family car. Is the government going to put an end to that partnership which seems to be going well? Assembling the Toyota Avanza has brought many benefits to Perodua. Available resources can be put to full use, and adhering to Toyota’s high QC standards has also lifted the entire Perodua plant’s QC standards as a whole. Basically I am interpreting this line as no more new manufacturing plants until Proton has no more problems clearing excess stock. Manufacturers like Geely will probably be stood up again.

Grants from an “Industrial Adjustment Fund” will be given to companies who contribute significantly to the economy. It will be based on scale, and based on a model-by-model basis. R&D grants will also be made available to companies who qualify. However I am skeptical on this, considering how MCMC treated Digi over the 3G license issuance just because it is foreign owned. Funds are likely to go to Proton and Perodua mostly, making up for their loss of the excise duty rebate.

Approved Permits will also be given priority to manufacturers who commits to an increased volume of production and exports, but need APs to complete their product range. I can see Naza being taken care of here. Basically in general the more you export the more you can import. However I am worried about Suzuki Malaysia Automobile Sdn Bhd. They have committed to assembling the Suzuki Swift here, and they’ve gotten permission from Suzuki to export the locally assembled Suzuki Swift in the ASEAN region. Considering the CKD Suzuki Swift might enter Proton’s price territory, would the government be fair to Suzuki Malaysia Automobile in this matter? The Suzuki APV and the Suzuki Grand Vitara are still CBU models which require APs to bring in. And the Suzuki Swift CKD requires a manufacturing facility (read license issue above). It is not like Suzuki has not been screwed over APs before. Containers full of Suzuki Swift and Suzuki APV vehicles stuck at the port.

Cars imported would be gazetted for duty competition. This is supposed to avoid tax underdeclaration. However, cars could come from different countries, with different trim levels, and they all have different prices. Are the customs going to keep the prices of every car with every trim level of all countries in the world?

The NAP did not outline what would replace the AP system when it is fully phased out in 2010. Would anyone be able to import cars in? The government will assist current Open AP holders through the business transition to other areas in the automotive industry such as sales and distribution of components. Looks like their spoon fed rice bowl’s pretty much gone. It’s interesting to read that in the NAP the government called APs “primarily used as a monitoring and data collection measure.” I am pretty much ticked off by this statement. Makes me feel they take us all for fools.

“It is expected that they will not primarily compete with high-volume national manufacturers in terms of pricing or target market.”

Seriously. Proton’s protection days are far from over. Goodbye globalisation!

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