Members of the Malaysian automotive industry met with Bank Negara Malaysia on Friday for a dialogue over the issue of the low and slow hire-purchase loan approval rate affecting the industry, following the implementation of the central bank’s new guideline on responsible financing that came into effect on January 1.
Proton Edar, Proton Edar Dealers Association (PEDA), Perodua, Perodua Dealers Association (PDA), DRB-HICOM and 11 other members from the Malaysia Automotive Association represented the automotive industry in the two-hour dialogue.
In a press release issued by PEDA following the meeting, it was stated that the industry members had tabled and expressed a common grievance pertaining to the BNM guideline, saying that its impact has already been felt and that, if left unchanged, it would have a continued negative effect on car sales. Bank Negara, however, felt that the issue is with implementation and less about the guideline itself.
“Bank Negara believes the crisis that resulted in the low and slow approval rate was due to the implementation by banks on the guideline,” PEDA’s president Armin Baniaz Pahamin said in the release.
“PEDA is pleased with Bank Negara’s proactive action in organising the dialogue, and we believe our business environment will be improved with the clarification made by BNM and look forward to a speedy solution,” he added.
The resolution from the dialogue was for banks to issue a standard guideline in terms of approval criteria as well as documentation required for vehicle loan processing, so that the public would be clear on the matter.
The association said it understood and shared the objective and the intent of the guideline, which promotes lending based on affordability, but said the interpretation on affordability was overplayed by the banks.
It added that although the approval rate was recorded at 54% for vehicle financing in January, a substantial number of loan applications were not even accepted for processing (and thus did not add to the statistics of loan submission), which meant that the actual approval rate was only 30%.
On the issue of ‘affordability,’ PEDA said it plans to meet the Ministry of International Trade and Industry (MITI) and the Ministry of Finance to seek a revision of vehicle excise and taxes and to discuss other methods in which cheaper cars can be had.
The release points out that the average population-to-vehicle ratio in developed countries (such as America and Europe) is three times higher than Malaysia because their cars are cheaper and more affordable; PEDA said if cars were made cheaper through lower excise and tax or from other means, this would ensure sustained growth for the industry while at the same time reduce household debts for the consumer.
Concern was also expressed that various policies instrumental to the sustainability of the automotive industry (such as the amendments to the Hire Purchase Act) were not synchronised with other government Ministries such as MITI and the MoF as well as other industry stakeholders. PEDA said it would be seeking further clarification on the government’s future direction forward for the automotive industry.
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AI-generated Summary ✨
Comments express strong support for BNM’s responsible financing guidelines, highlighting that high car taxes make vehicles unaffordable and lead to excessive household debt. Many emphasize that reducing taxes and tariffs on cars, especially entry-level models, would lower prices, enabling more Malaysians to own cars without overextending financially. Some point out that public transport improvements are essential to reduce reliance on cars and alleviate costs. Several comments highlight the importance of controlling household loans, advocating for shorter loan durations and stricter lending rules to prevent bankruptcy. Others criticize high taxes on Proton and government policies perceived to favor certain companies or protect local industries through grants and tariffs, suggesting these distort the market and inflate car prices. Overall, there's consensus that lowering taxes and improving public transport are key to addressing affordability and debt issues in Malaysia.