Driven Web Series 2015 Episode 2_ 001

Following the signing of new trade agreements including the Trans-Pacific Partnership Agreement (TPPA), Malaysians can look forward to a drop in car prices in the next two years, The Sun reports.

International Trade and Industry Minister II Datuk Seri Ong Ka Chuan said told reporters that within the next 26 months, various trade agreements will bring out the competitiveness of auto industry players. Besides the TPPA, Malaysia is also in the Asean Economic Community (AEC) and Asean Free Trade Agreement (AFTA), and has trade agreements with Japan and Australia.

“Car price reductions are facilitated in the open market policy and the whole world will explore the free trade areas with three basic principles – movement of goods and services, skilled labour and investment, which will offer competitiveness and reduce the car prices,” Ong said.

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“Under TPPA, cars from US and Canada will come in for 12 years to enjoy the free tax. We have to participate in this trend to compete with the international market. At least for a while, we will protect the local industry but after 12 years, you will have a choice of international cars,” he added. Read more on the TPPA-car price relationship here.

CEO of the Malaysia Automotive Institute (MAI) Mohamed Madani Sahari is on the same page. He believes that cheaper cars will continue to hit the market next year as car price rationalisation exercises had already begun since 2014.

“By 2018, we estimate 20% to 22% of price reduction. As of May this year, car prices have been reduced on average by 16.5%. How did we measure this? We monitor the prices model by model, variant by variant and we do not include the promotional prices. We only include the reduction of car prices on permanent basis,” he said.

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The talk of cheaper cars seems to be against the trend today, and Malaysia Automotive Association (MAA) president Datuk Aishah Ahmad takes a completely different view. “We expect the car prices will go up in 2016 due to the foreign currency exchange rate. But we are positive of our forecast for Total Industry Volume (TIV) this year at 670,000 units,” she said.

Aishah is not so certain about the positive impact of TPPA either. “TPPA is still in the future and we need to know the details. For local industry we have not been officially briefed. Import duty will be reduced for most of the companies in Malaysia but we are not sourcing from North America as we only source from Asian countries like Japan and Korea as well European markets,” she pointed out.

The government and the carmakers seem to have opposing views on car prices in general, and TPPA, but “cheaper cars for Malaysians” does seem to be against the current trend to the layman, and the weak ringgit as well as the fact that most auto players here have little business with North America seem like legitimate factors.

In fact, car companies have already announced prices hikes (or the possibility of prices going up) effective next year – Toyota/Lexus started the ball rolling, followed by Honda, Nissan, BMW and Mitsubishi.