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.
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.
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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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.
Gomen prefers high duties & excise duties to force pipu use public transportations.
Fully agree. Lets make it a gr8 success!
Gov gips bailout loan so no problemo. P1 did it, TC can do it!
P1 at least innovated.
ETCM went backwards.
So why gov need to gip TC?
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.
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.
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.
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…
So true, but haters prefer myths over facts…
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.
Keyword : Quality. Not kuantiti
A just concluded RCI alredi answers all ur Q
Bzzzt wrong answer.
Ini semua salah rosm…
Only zombies that dun think will answer like that.
When talk about GDP, talk also about spending.
As far as i know Boleh GDP is at the middle not high not low either.
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.
Dream on~
This one I agree with you. All bro, month month wait lah.
look at india tax so much to rakyat, why still complain here.
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?
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?
What proof did u have, that gov still funds P1?
Prove me
Agree. Let’s get rid of import tariffs.
Proton and Perodua will sink or swim against the tide.
Keep the tariffs as it incentivise pipu to use public transports.
Proton should stand on its own without any tax concessions
Oh…kita amat syukur……….dengan adanya bantuan insentif dari kerajaan , syarikat automatif Malaysia MAMPU menembusi pasaran automotif serantau dan seterusnya menakluki kuasa besar dunia
and who’s to blame for the depreciation of the ringgit?
And who’s to blame for the record breaking export figures… oh wai
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
Tax the rich no problemo
Sime darby doesnt own bmw malaysia. They are dealers. U gotta recheck your facts
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.
Who cares la…ppl nowadays use MRT wei..cepat murah selamat..k