Govt reviewing National Automotive Policy

Friday, September 23, 2011

Govt reviewing National Automotive Policy
Friday, September 23, 2011

GURUN: The Government is reviewing the National Automotive Policy (NAP) to meet the needs of the customers and industry players, locally and overseas.

Deputy Minister of International Trade and Industry Datuk Mukhriz Mahathir said the Government was talking with industry players to obtain feedback on how to create a better environment to boost the growth of the industry.

"The industry is very important and it has recorded high earnings for the country.

"I'm confident that Budget 2012 will give more emphasis to the sector considering that it is contributing to the economic growth apart from creating high-income jobs for Malaysians."

Mukhriz said this to reporters after Naza Automotive Manufacturing's celebration of the production of its 150,000th unit here Thursday.

He said the local car sector has grown tremendously compared to the neighbouring countries in which Malaysia is not only an assembler but also a manufacturer.
 -Bernama

Liberalisation in the used car market?

The Star Business, Saturday March 19, 2011

SOURCE...


Liberalisation in the used car market?

THE issue of Approved Permit (AP) has long been a contentious subject and a target of constant criticisms.
Introduced in 1970, the objective of the AP system was to promote and provide opportunities for bumiputra entrepreneurs in the automotive sector.

Part of the review of the National Automotive Policy (NAP) announced in October 2009 by the Government and aimed at creating a fair, liberal and transparent policy included doing away with the AP system.

A used car dealer in the Klang Valley. ‘Not everyone can afford new vehicles and many also do not want the hassle of paying a car loan,’ says a dealer.

 

Under the NAP, open APs (which allows the bumiputra holders to import any brand of car from any country) will be scrapped by Dec 31, 2015, while franchise APs (which allows holders to import specific brands and makes from its principal) will be terminated by Dec 31, 2020.

The question is whether this would actually happen. Under the first NAP in 2006, the AP system was supposed to be abolished by 2010.

No political will

However, when the time came to implement it, many believe that the Government buckled under pressure and ended up postponing the termination of the open AP and franchise AP systems to 2015 and 2020 respectively.

“The APs are said to be given away free to the (bumiputra) entrepreneurs to kick-start their businesses, but over the years, many of them ended up selling them to third parties for profit rather than importing cars for themselves,” says a local used car dealer, who wishes to remain anonymous.
At Budget 2010 two years earlier, the Government slapped a RM10,000 fee for the issuance of each open AP.

The RM10,000 charged, meanwhile, would be used by the Government to set up a fund, with the money to be used to ensure smooth and orderly shift of bumiputra entrepreneurs to other business sectors.

“The RM10,000 fee is a burden for used car dealers as it can cost between RM40,000 and RM50,000 (for us) to purchase an AP. Of course if it's a more expensive car, the (AP) cost would be higher,” says the used car dealer.

With the abolition of APs, it would be a “free-trade” system, he says. “That means that anyone would be able to import vehicles.”

A Klang Valley-based used car dealer doesn't believe that a liberalisation of the automotive industry, especially the abolition of APs, will ever happen.
He says although the abolition of the open AP system by 2015 is a good move and sounds promising, he thinks it won't happen given the strength of the lobbyists.

“How can they abolish the APs? If that were to happen, so many bumiputra business people would be affected. You can talk about it, but I don't think it will happen at least not in my lifetime!”

Proponents of APs

The Association of Malay Importers and Traders of Motor Vehicles Malaysia (Pekema) meanwhile, is hopeful that APs will be maintained.

Vice-president Sharifah Noor says bumiputra entrepreneurs that were dependent on APs would be hurt as they had invested considerable sums in the business.

She says the automotive business is its members' main income stream and a springboard for them to venture into other businesses.

“Even though our members have diversified businesses, the cash cow is still the AP business. Removing it (the AP) will affect their other businesses.

“Our members contribute a lot to the Government in terms of import and excise duties as well as sales tax.
“If you don't look after their interests, there will be some impact on the country's economy,” Sharifah says.
Earlier last year, it was reported that Pekema Sabah branch had asked for the review of the (RM10,000) levy charged on open APs to import used vehicles. Pekema Sabah had also requested the Government to review the policy to end the AP system.

Pekema Sabah chairman Rozman Isli says the levy of RM10,000 for the issuance of each open AP is a burden to members, especially during the economic slowdown.
Sharifah says Pekema has proposed to the Government to split payment of the RM10,000 levy into two parts to make it easier for its members.

“The levy has been approved and Miti (International Trade and Industry Ministry) is finalising it with the Road Transport Department,” she says.

Earlier this year, it was reported that Pekema Sarawak had urged the Government to set up the Bumiputra Economic Performance (BEP), a unit akin to the Performance Management and Delivery Unit to specifically plan, implement and monitor the economic performance of bumiputras.

The BEP is expected to be a permanent secretariat and headed by a chief executive officer with ministerial rank who reports directly to the Prime Minister, according to Pekema president Datuk Zainuddin Abdul Rahman.

The structure would allow BEP to oversee matters related to bumiputra economic agenda including overwriting the authority of certain heads of government agencies if needed.

Poser for used car dealers

For dealers of imported used parts, “D-Day” is just around the corner. Under the NAP, the importation of used parts and components will be prohibited from June 2011. Safety and environmental concerns are the main reasons for this policy.

Tan, a Penang-based used parts dealer, believes this policy will cripple the used car business.
“Thousands of players are involved in the used parts business in the country. This policy will kill us.
“But don't just think about the business owners. What about the employees? In the end, there will be hundreds of thousands of people that will be unemployed,” he says.

Tan adds that the Government should conduct a study on the impact before the policy is implemented.
“Banning used parts would also mean that if you have a year 2000 Toyota, getting new parts for an old vehicle would be difficult.”

Chang, a used parts dealer in Kuala Lumpur, says it is a misconception that used parts are less reliable than new parts.  “Cars break down every day. This can range from a new car of three months to one that's been around for a decade.”
Chang says not everyone can afford new vehicles, adding that many also do not want the hassle of paying a car loan.

“Used parts are also more affordable and contrary to popular belief, last a long time,” he says.
According to an article on insurance web portal Malaysia Insurance Online (MIO), imported used parts and components are actually cheaper than those manufactured locally. It also says imported used commercial vehicles also provide cannibalised parts for the industry.

From the insurance industry perspective, MIO says it is not uncommon for claims personnel to tweak part prices when assessing the claims quantum.
“The tweaking is to put in some second-hand or cannibalised parts as replacement for the damaged ones.
“Those used parts are important in scaling down costs for the industry to contain the ever deteriorating loss ratios.”

MIO adds that ultimately, the insured will benefit from the used parts industry.
“While the facts are such, caution should not be thrown to the wind the escalation in theft of motor vehicles is also the result of increasing demand for cheap cannibalised vehicle parts.”

END OF ARTICLE:
l

ARTICLE: The road to liberalisation

The Star Business: Saturday March 19, 2011

The road to liberalisation

By JAGDEV SINGH SIDHU
jagdev@thestar.com.my

TIME is ticking and there is a lot to be done. The Malaysian automobile industry, long cradled by protectionist measures, is seeing imminent liberalisation creeping up over the horizon and there is a lot that needs to be corrected and strengthened before the car companies and vendors get set for an open environment.
“Malaysian Automobile Association (MAA) members would like to see liberalisation brought forward with certainty so that they and their principals would be able to strategise future plans,” says the association's president Datuk Aishah Ahmad.

Datuk Aishah Ahmad ... ‘MAA would like to see liberalisation brought forward with certainty.’

 

The blueprint for liberalisation has long been known. The National Automotive Policy (NAP) review in 2009 spelt out the steps that will be taken by the Government to slowly and eventually liberalise the automobile industry.

According to the schedule, the controversial import permits (APs) will be dismantled by end 2015 and franchise APs by the end of 2020. Imported used parts will be phased out in June this year and the Government recently announced it will stick to the original timeline. New conditional manufacturing licences were issued, fuel standards will be adopted and although postponed right now, a vehicle end of life policy will be introduced.

While AP holders will surely kick up a fuss on the potential loss of business, there is very little that can be done as free trade agreements have been signed between Malaysia and other countries which demand fairer market access. Malaysia has signed the regional Asean Free Trade Area (Afta), and is implementing Asean FTAs with China, Japan, Korea, India, Australia and New Zealand.

The country also has bilateral FTAs with Japan, Pakistan and New Zealand.

Given the urgency, the Malaysia Automotive Institute (MAI), an agency under the International Trade and Industry Ministry (Miti) tasked with coordinating and implementing the broad objectives of the NAP, has already set out to work.

“At the end of the day we want our automotive industry to be competitive,” says MAI chairman Datuk Kamaruddin Ismail.

Will car prices fall?

Liberalisation will likely see import tariffs for cars outside of Malaysia cut. Currently cars imported from countries in South-East Asia have zero import duties levied on them if local content requirements are met.
The general belief is that car prices should fall for cars imported from outside this region. Sadly, that may not be the case.

Mercedes-Benz Malaysia president and CEO Roland S. Folger thinks liberalisation does not necessarily mean cheaper cars or automotive products. Aishah concurs, adding that liberalisation might not lead to lower duties but will create a more competitive environment with level playing field.

“It depends on the model of liberalisation. In general going by global trends, liberalization increases the extent of competition resulting in lower prices, more models,” says Kavan Mukhtyar, Partner & Head of the Automotive & Transportation Practice Asia Pacific at Frost & Sullivan.

“As prices are lowered, the sales volume will witness a healthy growth. However liberalisation should be timed according to the priorities of the nation. Too rapid a liberalisation can potentially have an adverse impact on industries and local employment.”

Opening up the field

The scenario being painted is that when full liberalisation takes place, the marketplace would be different than today. Access to Malaysia from foreign car companies, especially from the free trade agreements signed with Japan, South Korea and China which will kick in at the latest in 2018, will see equal treatment accorded to cars imported from Southeast Asia.

“Governments around the world want to benefit from the opportunities arising from this trend. However every free trade agreement could present several challenges for certain industries in the home market,” says Mukhtyar.

“In the Malaysian context, the automotive industry will face stiff competition from liberalisation. The benefits may be greater foreign direct investments. I am sure the Government will carefully consider the benefits versus challenges from liberalisation while planning the timelines.”

One example where a country has benefited from liberalisation has been Thailand.

In the past, detractors have said Thailand relies too much on foreign input, has no indigenous automotive technology and their industry represents a “screwdriver assembly” and not pure manufacturing.
Since then, the scepticism has waned as more sophisticated and large scale manufacturing has taken place in Thailand, boosting its economy through job creation and export earnings.

While Thailand has leaped forward in growing its automobile manufacturing base, Malaysia's has somewhat stagnated as domestic production from the national makes, although rising, is no where near that of Thailand.
Even so, it may not be too late for Malaysia.

Years of nurturing home-grown talent has paid off in some ways and for DRB-HICOM Bhd, its CFO Datuk Lukman Ibrahim believes there is a rush to get as many foreign car companies to establish operations in Malaysia before 2015 as possible.

“We should accelerate and capture as many companies as possible into Malaysia,” he says.
“And we should open up in giving manufacturing licences now instead of later.”
That urgency might be a reason why DRB-HICOM decided to rope in Volkswagen as a partner in its upcoming assembly operations in Malaysia. The entry of big names into Malaysia which are not already established in South-East Asia is a coup for Malaysia.

“Objective of liberalisation is to make Malaysian car companies more competitive not only in Malaysia but also in the international arena,” says Aishah.

“Companies have to be prepared and move towards stiffer competition. Only those who can take the global onslaught will survive.”

The tale of two national carmakers

No doubt about it - Proton and Perodua need to get set for rising competition.
Towards this end, a merger of these two companies that would result in the scale and strength plus the entry of a Japanese foreign partner in Daihatsu and Toyota has been mooted. However, those plans have been shelved with the Government less keen to do a forced merger.

But the impact on these companies, which currently command a market share of 60% in passenger cars, would be tremendous.

Principals of non national car players would most likely rationalise their CKD operations in Malaysia vis-a-vis their production bases, particularly, in neighbouring countries.

As it will be a huge game changer for the national makes, the MAI has asked Proton and Perodua to provide details on the companies' gameplan in a more open environment.
“They have a target of 2015 to reduce cost by a certain percentage and to improve quality,” says MAI CEO Madani Sahari.

“For full realisation of the potential benefits that market liberalisation has to offer, timing is of essence and it should be based on the readiness of the domestic economic sectors, automotive including, to face the challenges that market liberalisation will bring to bear,” says Proton in a response to queries from StarBizWeek.

“It is essential that the Government develop a roadmap on domestic market liberalisation to enable all relevant stakeholders along with the whole value chain, which include manufacturers, assemblers, dealers and vendors to be aware of the measures to be undertaken by the Government.”

The potential downside

There are also dangers of liberalisation for the domestic players. One example is Australia where the dismantling of protectionist measures has seen one domestic player fold and the short-term pains were quite severe for the industry.

Proton believes that could be avoided if there is proper planning, without which the consequences for Malaysia too will be economically dire.

“History has shown in many instances where once dominant domestic economic sectors went into oblivion with its place taken by foreign businesses due to the wrong timing of market liberalisation, albeit with clear and good intentions,” it says.

“All the efforts of the Government to develop and promote the domestic automotive industry thus far would be in vain.”
Engaged in discussion with the Government as to how to prepare for full liberalisation, Proton too thinks full liberalisation will see more foreign makes set up shop in Malaysia and that will help create economies of scale and eventually aid the vendors.

“Companies such as Proton would benefit from higher quality and cheaper components due to cost reductions of local vendors as a result of greater economies of scale provided by the foreign OEMs,” it says.

The race 

Two imperatives - cost needs to come down and scale bumped up. With demand for cars expected to rise substantially in Southeast Asia in the next 10 years, more production capacity will need to be planted in this region.

“All companies in the automotive industry in Malaysia need to focus heavily on building competitiveness. Key areas of focus would be to reduce cost, obtain economies of scale through exports, build product development capabilities,” says Mukhtyar.

To lower costs, the vendor system in Malaysia needs to become more competitive.
Proton says part of its roadmap is to create growth via its export programme, in which its vendors will play a crucial role.

“To enable us to compete successfully in the overseas market, we need the support and the versatility of our vendors as a significant part of the costs of the car is attributed to component costs,” says Proton.
“Versatility in terms of cost competitiveness, quality and technological depth are critical in supporting Proton to achieve its objectives as outlines in our roadmap.”

Vendors might feel that its not getting the support of scale from the domestic car makes to be more competitive. For one, local production is growing slowly and not all vendors are in the pink of financial health. Secondly, rebadging activity conducted by Proton might not see local vendors get the type of business like a car designed and manufactured by Proton.

Furthermore, should export programmes lead to the outsourcing of component production offshore Malaysia to a company in a foreign land, like what is happening in China, then vendors fear components made there might come back into Malaysia and compete with the parts made here.
That would be, in a nutshell, counter productive.

END OF ARTICLE...

ARTICLE: Revving it up

The Star: Saturday November 6, 2010

Revving it up

By JAGDEV SINGH SIDHU
jagdev@thestar.com.my

New vehicle sales may hit a record this year but key issues remain unresolved

The country’s car industry is poised for record sales this year and with the changes brought about by the revision of the National Automotive Policy to set the industry on liberalised mode, the pace is set to quicken.
Galvanising the industry further are the fresh moves to abolish taxes and excise duties for hybrid and electric cars and motorcycles to push the green agenda on high gear.

Even so, there are many other key developments set to emerge on the forefront which could further alter the industry landscape. They include the government-led initiative for a Proton-Perodua merger, the issuance of more manufacturing licences in the country and the much-hyped about entry of Volkswagen to assemble cars in Malaysia.

Meanwhile, auto players are basking in the possibility of seeing a record year in terms of new vehicle sales.
“The main reason for this growth in sales is a result of the strong economy in Malaysia, which emerged from a “V” shaped recovery,’’ says UMW Toyota Motor president Kuah Kock Heng.

Naza Group’s SM Nasarudin says the new licences will boost competition.

 

“New model offerings, reasonable interest rates that make car ownership relatively affordable and a young population with a strong desire to own a car – all these factors combine will make 2010 a record breaking year,” says Kuah.

According to Frost & Sullivan consultant Ahmad Faridz Dzulkarnain, growth in the first half of this year was largely driven by strong sales of MPVs (multi-purpose vehicles).
In this segment, the big numbers came from Perodua Alza and the Proton Exora which has led to a rise of 80% sales year-on-year.

Ahmad expects the growth rate to maintained for the remaining months of 2010, albeit at a slower rate compared to the first half of the year.

The supporting factors for rising sales include the launch of Proton Inspira this month, year-end festivity and the price reduction of hybrid vehicles.

“Moving forward, we hope consumers look for vehicles that are both more cost efficient as well as environmentally conscious. Awareness of the capabilities of automotive technologies today and the need to take pre-emptive steps to address global challenges such as sustainability will become more prevalent,” says BMW Group Malaysia managing director Geoffrey Briscoe.

MAA’s Aishah ... ‘Fuel quality should keep up with global trends.’

 

Budget 2011 which was unveiled not too long ago had included the abolishment of taxes for hybrid and electric cars for one year from a tax cut in the previous budget. Still, this is too short a period, says Malaysian Automobile Association president Datuk Aishah Ahmad.

“The validity duration should be at least 3 years for better business planning purpose,” she opines, addings that the incentives should not be limited to certain engine capacity only (2.0 litre and below).

“It should be given to all engine size.”

New auto licences

A key development that could potentially alter the industry landscape further is the awarding of new manufacturing licences issued by the International Trade and Industry Ministry.

As it stands now, Berjaya group has received a licence to manufacture commercial vehicles, hybrid cars, electric cars and luxury passenger vehicles in Malaysia.

UMW’s Kuah says Malaysia needs to do more to develop the component makers.

 

Although the licence does not grant Berjaya the permit to make cars under 1,800cc and below RM150,000 per unit, which represents a huge segment, it still is a milestone for the company.
Following this, Berjaya, which currently contracts out the assembly of vehicles, will now be allowed to conduct assembly on its own in a single plant. This will enable it to reduce costs through higher economies of scale in the long run.

In line with this, the company plans to assemble other makes of Mazda, beyond the Mazda 3, throwing in commercial vehicles into the mix as well.

The new licence is a signal that the Government is open to allowing more players in the commercial vehicle market, which Aishah says will heighten competition as brands from China would likely make inroads into the Malaysian market.

“There could be some rationalisation of existing assembly plants producing commercial vehicles in terms of production mix between commercial and passenger vehicles,” she says.

Protectionist – or not?

While many deem the government’s reluctance to allow car makers to penetrate into the national car segment as protectionist, Naza Group of Companies Joint Group executive chairman SM Nasarudin SM Nasimuddin still believes the new licences will enhance competition among the existing players, ultimately benefiting the industry and consumers.

Briscoe echoes this sentiment: “The introduction of new manufacturer’s licences will inevitably encourage greater investment into the Malaysian car industry by foreign producers and also aid in developing a more competitive industry, both of which are likely to have significant benefits to the Malaysian consumer.”
But market observers are not jumping to such conclusions – just yet at least.

They say for global car makers to be drawn into the Malaysian market, they will first need to assess if there is sufficient volume to justify committing considerable sums to build a full-fledged manufacturing plant in the country.

Without the right to dip into the segment long ring-fenced for the national car makers, which still accounts for the lion’s share of the market, the case for volume could be a little harder to make.

Lest we forget, neighbour Thailand has long been benefiting from the protectionist policies of Malaysia to grow their own car industry which includes component makers.

Any policy measures in Malaysia to woo foreign car makers will be benchmarked against the successful steps Thailand has taken thus far towards that end.

Even though the new licences may not allow new competition in the below 1,800cc segment, assemblers in the country have already ramped up their CKD (completely knocked down) operations in the country in accordance with the tax reduction brought about by the revision of the NAP.

Still, Kuah says the market for vehicles with an engine capacity greater than 1,800cc remains small as in 2009, it was only 6% or 23,178 units of 407,005 cars sold.

“Therefore, if there is an increase in the number of players for 1,800cc and above vehicle, it will be very crowded. Even today, there are far more active players than compared to five years ago,” he says.

Gearing up for green

Despite the limitations of any manufacturing licence in the country, Ahmad says the presence of new players will no doubt provide long-term benefits to the industry.

He says new manufacturers will offer consumers choice and existing players need to remain competitive to deliver better products to consumers.

“Consumers will also be able to purchase locally-assembled hybrids, electric cars and luxury segment vehicles at relatively cheaper prices – hence better penetration rate of these segments are expected,” he says.
For the industry and country, the new licences will be basically for green vehicles and commercial vehicles which could lead to increased sales and investments by the industry.

The industry is still new and this segment would also see direct competition from Thailand which has its own eco-car development. Toyota will be assembling its best selling Prius in Thailand from this month due to the strong yen.

Just never enough

While the granting of licences is a first step, market participants feel more is needed to liberalise the sector to woo investments into the country.

“We certainly need to have policies that can compete with our neighbours in terms of attracting new investments. As the largest passenger car market in the region, we have a very attractive market and if our policies are competitive, we will see more investments coming in,” says Nasarudin.

Edaran Tan Chong Motor Sdn Bhd executive director Datuk Dr Ang Bon Beng says the industry cannot depend on domestic market alone to achieve strong growth.  “It is imperative to have a level playing ground for all auto players where survival and success are based on competitive edge, in order to prepare one for regional expansion,” he adds.

Market observers say the industry, which saw existing companies increase assembly of cars in the country from lower taxes imposed on CKD operations, would be open to even more cars coming from Japan and Korea from 2015 onwards once Free Trade Agreements between Malaysia and Asean come into effect in the future.

Aishah says that in the absence of a level playing field in Malaysia, global automotive players have been making their presence felt though contract assembly of their models in Malaysia, shying away instead from direct investments.

“Inconsistent policies have created fear among automotive players on whether or not to invest in Malaysia,” she says.

Case for component makers

Another outstanding issue is the competitiveness of the local component makers.

Calls have been made to develop the Tier 1 vendors to have them innovate and plough in more resources into research and development to create a more vibrant supply chain.

Due to a lack of scale, a number of the component makers in Malaysia are basically still nut and bolt assembly companies, importing the components and assembling them for car companies in Malaysia.
“Presently, not many first-tier suppliers can compete on a global scale. Malaysia needs to do more to further develop the first-tier, second- and third-tier parts components suppliers,” says Kuah.

He says within the Asean region, Thailand has a larger automotive base for parts components manufacturing, and hence, enjoys greater economies of scale.
“The challenges facing the local automotive parts components manufacturers is cost competitiveness, apart from quality and access to latest technologies,” says Kuah.

One component maker claims that protectionist policies have resulted in components from Malaysia attracting higher import duties into countries in South-East Asia.

One way for components makers to up the ante is by forging Technical Assistance Agreements (TAA) with leading global OEM companies to enable them to access design capabilities, best practices in production and quality control.

“The government should consider providing incentives to Malaysian companies to enter into such agreements,” he says, adding that UMW Toyota Motor Sdn Bhd (UMWT) is aiming to export more than RM1bil worth of automotive parts components to Toyota affiliates worldwide. It is a 43% increase over the more than RM700mil the company earned in 2009.

Another perennial issue is the high cost of vehicle ownership in the country, no thanks to high taxes. Such taxes may be a significant source of Government revenue but they remain a sticky issue, one that has also made things difficult for policies such as the vehicle end of life due to the high cost to buy cars.

Fuelling the situation

The poor quality of fuel in Malaysia is another touchy subject.

Energy companies say offering higher quality fuel involves higher costs which ought to be recouped through a small increase in fuel cost to end users.  Opponents of the passing the buck argument say legislation should be sufficient to compel companies to provide better quality fuel without having to burden the consumer.

For one, Nasarudin hopes for higher grade fuels, especially diesel, in the near future: “Global carmakers have stepped up efforts to develop new highly fuel efficient models that run on EURO IV or V diesel and by 2014, EURO VI will be introduced.

“These cars will greatly reduce fuel consumption and CO2 emissions, which need to taken seriously.”
Briscoe laments that for far too long, Malaysian automotive users have been compelled to utilise substandard fuels, even compared to their neighbours in the Asean region.

“Lower grade fuels leads to higher emissions of harmful gasses, not to mention cause higher wear and tear on engine components. With the government committed to reducing carbon emission intensity per gross domestic product (GDP) by 40% to 2005 levels by the year 2020, the adoption of Euro IV standards is a vital step in ensuring effective widespread reductions from throughout the passenger and commercial vehicle segments,” he says.

“The quality of our fuel in our country, particularly diesel, also ought to keep up with the latest global trends,” says Aishah.
“Otherwise it will hamper the car companies from introducing the latest design and technologies into Malaysia.
In addition our country may end up a dumping ground for cars with obsolete technologies and old designs.”

The BIG merger

The merger between Proton and Perodua is no longer a matter of if, but simply when.

But not all are for the marriage. Its detractors say a merger could be a setback for the industry as it would only benefit Proton. One analyst is concerned that with the merger, Perodua’s historically high return to shareholders could suffer a beating.

Naturally, not all agree. “I don’t think consumers care. If Daihatsu remains in the picture, then there is no difference to them,” says an auto player. “This deal depends on what Daihatsu would do.”

Related Stories:

Proton MD’s vehicle end-of-life policy proposal received a lot of brickbats

Used car sellers hit by margin squeeze

2010 car sales performance in major Asean markets

Rebadging – a step forward or back?

Calls for faster liberalisation

END OF A WELL WRITTEN ARTICLE:

That's all folks, thanks for having the time and patience to read this blog entry.

The Star: Calls for faster liberalisation

The Star: Saturday November 6, 2010

Calls for faster liberalisation

By FINTAN NG
fintan@thestar.com.my

SINCE mid-September when Malaysian Investment Development Authority chief executive officer (CEO) Datuk Jalilah Baba announced that five foreign auto-makers were interested to set up shop in the country, the market has been abuzz with speculation on who and when this will actually happen.

Jalilah had mentioned then that the Government was evaluating the applications by these foreign companies.
International Trade and Industry Minister Datuk Seri Mustapa Mohamed had said that the Government would decide on the applications of the foreign manufacturers by year-end.

Click to view bigger image.

 

These manufacturers, from China, India, South Korea and Japan, had applied for licences to build passenger cars of below and above 1,800cc.

At present, foreign manufacturers who build their vehicles here do so via contract assembly with the likes of DRB-HICOM Bhd, the largest local contract manufacturer in the country.

More recently on Oct 20, Berjaya Corp Bhd chairman and CEO Tan Sri Vincent Tan announced to the stock exchange that the company was granted a manufacturing licence by the ministry for the assembly of commercial vehicles, hybrid cars, electric cars and luxury passenger vehicles.

Tan had earlier in the year signed a memorandum of understanding (MoU) with Shenzhen, China-based BYD Auto Co Ltd to explore the possibility of building the latter’s F0 1-litre right-hand drive passenger car for South-East Asian markets.

Jalilah noted that the decision to give licences for the assembling of passenger cars below 1,800cc “is a policy matter” to be taken under consideration by the Government.

The “policy matter”, of course refers to the National Automotive Policy (NAP), which first came into operation on March 22, 2006 and was revamped effective Jan 1 this year.

Although the current NAP is an improvement from the one introduced in March 2006 which had not tackled key issues such as the oft-abused approved permit (AP) system (whereby importers need to have one permit per car) and protectionism (primarily of Proton Holdings Bhd), analysts generally feel that it too, is inadequate.

For one thing, open APs (which apply to imports by non-franchise holders) will only be abolished at the end of 2015 instead of the end of this year as planned earlier while franchise APs will only be abolished in 2020.
Furthermore, the revamped NAP only “liberalised” the luxury passenger car segment by allowing auto assemblers to manufacture cars of 1,800cc and above, which ruled out the F0 petrol-based passenger car being assembled here.

Mid-market car segment

As a result, industry observers, at the time of Berjaya Corp’s MoU with BYD, were not optimistic of Berjaya Corp and BYD being granted permission to assemble passenger cars below the 1,800cc range.
It is also interesting to note that Berjaya Corp’s announcement did not include the mention of mid-market passenger cars as part of the manufacturing licence even though this segment represents the most lucrative part of the market.

Passenger cars of 1,800cc and below represent 90% of sales in Malaysia, the largest passenger car market in South-East Asia where total industry volume (TIV) beat expectations at 536,905 units last year versus expectations of half-a-million vehicles.

From January to September this year, TIV rose 14% to 453,249 units compared with 397,950 units in the same period last year.

Bangkok-based IHS Global Insight principal analyst for Asean vehicle sales forecasts Thanachai Vorachaivanich says in an email reply to StarBizWeek that the impact on the local industry will be minimal at best as the manufacturing license itself will be very restrictive, allowing for only the assembly of hybrid, electric, commercial and luxury vehicles.

“Moreover, the new key players are likely to be brands from India and China, which have yet to earn acceptance from Malaysian consumers,” he says.

Thanachai says the NAP remains “very much protective of the national automakers” and that the Government’s goal in giving the licenses is not to promote industry growth but rather to promote the country as an export hub.

He says the recent announcement of a full excise tax exemption for hybrid cars (in Budget 2011 where incentives for hybrids were extended for another year) only benefits a marginal portion of the consumer base and from a manufacturer’s perspective, does not give any competitive edge for the country to become a hybrid car manufacturing hub as the tax exemption remains noncommittal and short-lived.

“The Malaysian government needs to commit to a concise, long-term policy in promoting the manufacturing of fuel-efficient and alternative-energy vehicles to draw in more foreign investments,” Thanachai says.
For the country to capitalise on its full potential in market growth and to become a manufacturing hub, he says, the Government needs to open the local automotive industry faster and set sustainable policies that allow fair competition among automakers.

“Any changes that take place will likely be a short-term effect,” Thanachai says.

Meanwhile Malaysian Automotive Association president Datuk Aishah Ahmad says a progressive plan to liberalise the industry and level the playing field, for local and foreign players, is important to allow companies to map out their future investment plans, including possible investments into Malaysia.

She adds that a liberalised auto industry will also prepare the local players to be more competitive in line with the trends of market liberalisation and globalisation.

“In the absence of a level playing field, global automotive players are just making their presence felt through contract assembly of their models in Malaysia and shying away from making direct investments,” Aishah says, adding that inconsistent policies are making these players think twice about investing here.

She points out that the national manufacturers – Proton Holdings Bhd and Perusahaan Otomobil Kedua Sdn Bhd – need to continuously improve their competitiveness and capabilities to penetrate foreign markets.

High excise duties

“Our existing taxes, particularly excise duties, are very high. We’ve proposed to the Government that the duties be lowered so as to reduce the burden of vehicle ownership on ordinary consumers,” Aishah says.
Naza group’s joint group executive chairman SM Nasarudin SM Nasimuddin says the country needs policies that can compete with countries in the region to attract new investments.

“As the largest passenger car market in the region, we’ve a very attractive market and if our policies are competitive, we will see more investments coming in,” he says.

SM Nasarudin says the move to give out the licenses will enhance competition among the existing players and ultimately benefit the industry and consumers.

Edaran Tan Chong Motor Sdn Bhd executive director Datuk Dr Ang Bon Beng says the industry cannot depend on the domestic market alone to achieve strong growth.

“It is imperative to have a level playing ground for all auto players where survival and success are based on competitive edge, in order to prepare one for regional expansion,” he says.

END OF ARTICLE...

That's all folks, thanks for having the time and patience to read this blog entry.

ARTICLE: NAP yet to draw major investments from abroad

The Star Business, Saturday August 7, 2010
NAP yet to draw major investments from abroad
By EUGENE MAHALINGAM
eugenicz@thestar.com.my

THE revised National Automotive Policy (NAP) has not been a blazing success as initially hoped by the Government, as it has yet to attract any significant foreign investments to Malaysia.

“If the question relates to getting global motor vehicle manufacturers to set up new production bases in Malaysia, then it is true that up to now there has been no announcement by global players on such a move,” says Malaysian Automotive Association president Datuk Aishah Ahmad.

Aishah, however, adds that there are several factors investors need to take into consideration before making any investment decisions.

“Whether to set up a base in Malaysia is a business decision which depends on a host of other factors,” Aishah tells StarBizWeek in an e-mail response.

An industry observer who requested anonymity says it is not difficult to see why the automotive industry has not attracted in-flow of investments.

An analyst says industry liberalisation so far has been more focused on the luxury segment, so Proton and Perodua are still protected.

“Everyone out there is only interested to bring in CBU (completely-built-up) units into Malaysia because we are still an attractive passenger car market,” he says.

“With most foreign automotive companies already setting up bases in Thailand and making it their regional hub, it is hard to imagine why anyone would want to uproot to relocate or worst still, to add fresh capacity via a new plant in Malaysia.”

Under the NAP which was reviewed last year, the country’s automotive industry was further liberalised to see a more effective development of the industry.

Among the measures introduced by the Government was to issue manufacturing licence to foreigners for selected segments without imposing any equity condition beginning this year.

This was offered for the production of luxury passenger vehicles with engine capacity of 1,800cc and above, pick-up trucks and commercial vehicles, hybrid and electric vehicles, as well as motorcycles of 200cc and above.

In early March, it was reported that the Government had received “overwhelming response” from foreign luxury car manufacturers seeking further clarification on the NAP.

“The Government has acknowledged that the local automotive industry needs to improve its capabilities and competitiveness to survive in the long term,” says Aishah.

“Local players are encouraged to look beyond the domestic market and to explore partnerships with foreign automakers in penetrating the global markets,” she adds.

Aishah says Malaysian companies should convince their principals on the attractiveness of this form of partnership.

“For non-national makes, this would depend very much on their principals to make such a move,’’ she says.

Nevertheless, the liberalisation of the local automotive industry seems to have kick-started some initiatives.

UMW Toyota Motor Sdn Bhd has announced it plan to invest RM170mil over the next three years to further develop its assembly plant in Shah Alam.

The company also plans to assemble its Toyota Camry model in Malaysia for the local market, replacing the current Thailand-imported units from 2012.

France’s Peugeot has announced its plan to make Malaysia a production hub for right-hand-drive vehicles.

Under a memorandum of understanding between local distributor Nasim Sdn Bhd and Automobiles Peugeot last month, a C-Segment sedan – about the size of Honda Civic or Toyota Altis – is expected to be launched next year.

The car, to be powered by either a 1.6-litre turbo-charged or 2.0-litre engine, will be assembled at Naza’s plant in Gurun, Kedah.

An analyst with a local bank-backed brokerage says the Malaysian automotive industry will not be “completely liberalised” as long as there are excise duties in place.

“Liberalisation of the industry so far has been more focused on the luxury segment, so Proton and Perodua are still protected. Only if excise duties are reduced, then will the NAP have a positive impact.

“If more foreign automakers come in with lower car prices, then it’s good. But so far, none has set up their lines here.”

END OF ARTICLE...

Source:
http://biz.thestar.com.my/news/story.asp?file=/2010/8/7/business/6813393&sec=business

That's all folks, thanks for having the time and patiece to read this blog entry...

Ban on import of used car parts illogical

SOURCE: THE STAR: OPINIONS: LETTERS:
Thursday November 19, 2009

Ban on import of used car parts illogical

I REFER to the news report in Sunday Star and I support the Johor Used Car Spare Parts Dealers Association on their protest. What they said makes a lot of sense.

Many people are unhappy with the govern­ment ban on the import of used car parts in 2011. They complained to me since I am the legal adviser of Fomca.

I feel that this is a rash move by the Govern­ment. No statistics or studies have been furnished to show that the use of second-hand parts are the cause of the rising accident rate – if that is the reason for such a move.

Actually, no one knows the actual reason for the ruling and as such, I think the Government owes the people an explanation in order to avoid speculation and confusion.

Lower and middle-income groups are the most affected, especially the kampung and rural folks where second-hand parts are still being purchased and used for very obvious reasons, i.e. new parts are no longer available for old cars.

Forcing these folks to buy new parts for old cars does not make any sense since firstly, these folks can’t afford it as they are expensive and obviously when new parts are not available, they will be forced to scrap their cars. Even pensioners are affected by the move.

To get them to buy new parts is an unnecessary burden on most of them. Owners of old cars are already not eligible for third party insurance and are forced to take up comprehensive insurance which cost much more and now this?

If the Government wants to encourage people to buy local cars, then prices must go down and quality must improve. The Government can’t force people to purchase local cars by putting in place rash policies like this – if again that is the reason for imposing the ban. Why must the Government burden the people?

In Europe, the use of reconditioned car parts and second-hand car parts is encouraged as they are environment-friendly. Maybe the Government should look into this aspect. The Pensioners Association and Cuepacs should raise their objections to the Government.

The Government did the right thing in withdrawing mandatory inspection for cars of more than 15 years old. I urge the Government to do the same on second-hand parts too.

By A. JEYASEELEN,

Legal adviser, Fomca.

Job losses from New Automotive Policy compensated in long term: Mustapa

SOURCE: The Star: Monday November 16, 2009
Miti wants industry to look at NAP in the long run

SINGAPORE: Jobs lost due to the implementation of the New Automotive Policy (NAP), which will ban imported used car spare parts, will be compensated in the medium- and long-term.

International Trade and Industry Minister Datuk Mustapa Mohamed said the policy was in place to ensure safety and develop the country’s own automotive components industry.

“We are aware of the business interest but all this has been explained when we discussed it with industry players.


Above: Discussion: Mustapa talking with Singapore’s Minister in the Prime Minister’s Office Lim Hwee Hua during a breakfast meeting with the Singapore Business Federation on the sidelines of the Apec Summit in Singapore yesterday.

“Anyway, this policy does not take effect immediately and there is still room for people to improve,” he said, adding that the country needed more companies to set up base in Malaysia in order to develop the local automotive components industry.


“Once this develops, all the short-term job losses can be compensated in the long run.

“Yes, there will be glitches here and there but with some adjustments, this will benefit the country,” he said.

He added that he did not believe that 100,000 jobs would be lost when the NAP ruling came into effect in 2011.

Asked if the Government might reconsider the decision, he said the implementation of the policy would be carried out gradually.

On Saturday, Johor Used Car Spare-Part Dealers Association committee member Ng Keng Heng had said the ban would cause major problems to both dealers and owners of old cars.

He had claimed that there were more than 5,000 used car spare-part dealers around the country and the ruling could cause the loss of about 100,000 jobs.
Malaysian Industrial Development Authority director-general Datuk Jalilah Baba said it was still too premature to talk about job losses as the NAP’s main objective was to improve services.

References:
1) http://thestar.com.my/news/story.asp?file=/2009/11/16/nation/5118017&sec=nation

That's all folks, thanks for having the time and patience to read this blog entry...

NST Article: Classic owners in the lurch

New Straits Times: CBT: CARS.BIKES.TRUCKS

Classic owners in the lurch

Submitted by yani on Fri, 13/11/2009 - 7:49pm



Nine days after the new National Automotive Policy (NAP) was announced on Oct 29, the government withdrew the controversial mandatory 15-year-vehicle inspection measure due to overwhelming public displeasure.

It was indeed a huge relief for many but are old car owners actually free to enjoy their right of ownership of such vehicles?
The other NAP measure - ban on import of used car parts and components effective June 2011 - will affect them.

Automotive chop-shops are alternative used vehicle spares hyper-markets existent globally to enable motorists to keep their cars on the road at affordable costs.
These shops offer parts which are generally in good condition, reasonably priced and available at an instant.

A ban on used parts would eventually force owners to dispose of their old cars for new ones.

Even if one can afford to purchase new parts, what if the particular make is out of
production?

Should parts be available abroad, the waiting period and high costs of purchase will frustrate the car owner.

"Our low exchange rate would make it difficult for us to purchase parts via e-Bay or online and I urge the government to reconsider this ban on imported used parts," said 25-year-old Kevin Lee from Kampar, Perak.

"Some of us still prefer our old cars and see absolutely no reason or rhyme to own a new one, so please give that freedom of choice," said Naseer Rafick, who uses his old continental make of 30 years on a daily basis without any problems.

Old car owners could be loosely categorised as low income earners, non-believers of new car price structures, sentimental motorists, students, retirees, rural folk, motor financing rejects and vintage and classic car owners.

In this country, cars are technically deemed as falling into the "old vehicle category" after 10 years since the date of production based on the policies established by the finance and insurance industry.

Gone are the days when finance or credit companies would offer hire-purchase schemes for motorists seeking to buy cars of this age. Even if a loan is offered for a car of 10 years and above, the offering of such a package would depend entirely on the credit standing of the hirer and not on the value of the vehicle.

The bankers call this "character financing". Those who cannot afford to pay cash for such purchases would have to worry about their financial creditworthiness in the eyes of the financiers when applying for loans. In line with this general financing guidelines by these finance companies, motor insurance companies have also maintained a general practice of not offering the preferred comprehensive (first party) motor insurance policies for cars above 10 years old.

In the alternative, motorists are allowed to purchase third party policies to ensure the continuous usage of these old cars. The Road Transport Act empowers insurance companies to offer this minimum form of insurance coverage to enable old car owners to enjoy the right of usage of these vehicles.

However, some time in December 2008, the majority of insurance companies in the country jointly decided to scale back on issuance of third party policies as most of them were allegedly recording losses which they claim were due to high third party bodily injury claims.

Motorists were only made aware of the non-issuance of such policies when they applied for renewal. Many were left in the lurch as they were not able to renew their road tax due to failure in obtaining insurance coverage for their vehicles.
The rejected motorists were directed to try their luck with the Malaysian Motor Insurance Pools (MMIP), a high risk insurance pool collectively run by the insurance industry and deemed as the insurer of last resort.

Due to the overwhelming surge of applications, MMIP and Pos Malaysia formed a strategic partnership to enable the public to purchase such policies at any one of the latter's 684 outlets.

Sounds great but the truth of the matter is that now motorists were not only required to comply with stringent requirements like obtaining a vehicle inspection certificate prior to issuance of policies but had also to fork out extra cash due to the doubling and tripling of the loading and premiums compared with that of the year before!

Some have also complained of delays in purchasing policies from these outlets.
"Naturally with a population of 2.7 million cars on the road that are 10 years or older and only one establishment to handle all insurance renewal applications, many other operational issues like claims and repairs would be also a cause for concern in the near future," said a senior insurance agent.

Sadly, due to these stringent requirements, many motorists have resorted to driving or riding their vehicles without valid insurance and road tax coverage nowadays.
Legal implications, if this trend continues, would be disastrous.

As far as these insurance woes are concerned, the grievances of the general motoring public have yet to be resolved by the relevant authorities.
Some see this as another way of curtailing one's right of enjoyment of an old vehicle!

It is apparent from these issues that implementation of policies are done almost all the time with minimal cross section consultation and the voice of the Malaysian motoring public is clearly not loud enough.

Maybe, the time has come for motorists to establish a strong body, like a Federation of Automotive Clubs, to represent their cause to the relevant governing bodies to ensure consultation is effected before implementation and not vice versa.

By Andrew Suresh

END OF SOURCE:

References:
1)
http://cbt.com.my/091113/classic-owners-lurch


AGAIN, PLEASE DEAR GOVERNMENT, Do spare a thought for the Rural/POOR/Retiree and Classic Enthusiasts... Don't BAN KERETA POTONG... Otherwise, 5000 registered Kereta Potong Countrywide will be shut down and all its workers will be JOBLESS.

WHAT'S YOUR PROBLEM MY DEAR MEMBER OF PARLIAMENT and/or whoever behind the NEW NAP Decisionsn? WHAT'S WRONG with CHOP SHOPS? EVEN DEVELOPED COUNTRIES SUCH AS HONG KONG, THE UK, Australia, New Zealand, Netherlands and UNITED STATES OF AMERICA (called JUNKYARDS) have them...

Before I signed off, here's a Parting shot: My best friend's "LOW MILEAGE", Tip top, 1979 Datsun 120Y. Queuing up for scrapping (Waiting list) in exchange for a Proton since August...


That’s all folks! Thanks for having the time and Patience to read this Wonderfully Written Article…

Govt scraps end-of-life policy for vehicles

SOURCE: The Star, Saturday November 7, 2009
Govt scraps end-of-life policy for vehicles

KUALA LUMPUR: The Govern-ment has agreed to pull back the introduction of an end-of-life policy for vehicles, after taking into account the people’s views and feedback.

Since the announcement of the plan, the Government has received many complaints from the people who were generally not agreeable to the mandatory annual comprehensive inspection as a requirement for road tax renewal for vehicles aged 15 years or older, a statement from the International Trade and Industry Ministry said yesterday.

On Oct 28, the ministry an­­nounced the new National Auto­motive Policy, which included the vehicle end-of-life policy, reports Bernama.

Meanwhile, International Trade and Industry Minister Datuk Mustapa Mohamed said the Cabinet had decided to withdraw the policy after getting negative feedback from the public.

“The public, especially those living in rural areas, found this new policy a burden to them,’’ he said.

END OF SOURCE...

MY (JEFF LIM'S OPINION):

Hey, that's NOT ENOUGH! What About the "Abolishment of Chop Shops by 2011?"
PLEASE SCRAP THAT AS WELL. Otherwise, the Rural areas/poor folks with older cars will still suffer as they no longer can find USED parts/components for their car as they were FORCED TO BUY NEW SPARE PARTS. Owners' of currently LOWISH Maintenence Prestige conti-car such as Mercedes W124 E-class (which priced from RM20k (1986 230E) to RM45k (1995 E220 Masterpiece FULL SPEC) currently depending on year, specs and Engine Capacity) will suffer.

Besides the RURAL FOLKS, Ah Bengs, Ah Lians and other Kaki Modify would also be disappointed as they can no longer source USED REASONABLY PRICED ENGINE (from Chop Shops), Brakes, Rims, Gearbox for Transplant. This means NO MORE 6A12TT V6, 1.6 MIVEC, 4G93T EVO, B16A, B18C, H22A, Rotary Engines, M3 engine, B8 engines, Mira L500 Turbo and the lists goes on from 2011 onwards...

In my HUMBLE OPINION, there's nothing wrong with having "Chop Shops" (Potong Kereta) in Malaysia. EVEN Developed places such as England, Japan, Hong Kong and New Zealand still having "Potong Kereta" @ Chop shops...

LASTLY, THE EXCISE DUTY, SALES TAX and IMPORT DUTY IS STILL ASTRONOMICALLY HIGH. Up to 300%! Please do something about it by considering reducing it...

That's all folks, Jeff Lim Signing off... Thanks for having the time and patience to read this...

New NAP conditions affects used car dealers

New NAP conditions affects used car dealers

2009/11/01 - Bernama

KUALA LUMPUR: New conditions under the National Automotive Policy (NAP) that makes mandatory inspection for vehicles above 15 years at Puspakom burdens used car dealers and affects their business.
Many used car dealers and owners of cars over 15 years are frustrated with the government's move as it affects the lower income group.

The regulation, that comes into force on Jan 1 and will involve about a million vehicles, is among 18 new measures in the revised NAP to enhance the local automotive industry's competitiveness and make for safer, more environmental-friendly and technologically sound vehicles

A used car dealer, Mohd Rizal Sabtu, characterised the government move as adversely affecting the industry besides burdening rural consumers given that the insurance rates had risen to RM350.

"Now irrespective of the age of the vehicle the insurance is RM350. This is not third party but first party. The third party rate as I remember was done away in July. There is no more third party," he told Bernama here today.

The Zalfa Trading Enterprise entrepreneur said before the new conditions his company sold between 60 and 70 vehicles aged above 15 years in a year or about 15 vehicles in a month.
"I am not confident of selling that many units next year firstly because the new condition requires annual Puspakom inspection for renewal of road tax.

"Secondly, there is no more third party insurance. They have to buy first party insurance at RM350. This is burdensome to rural folk who mostly buy paying cash and are self-employed. For a bank loan to buy a new car, salary slips and bank statements are needed," he said.

"A used car aged 15 and above usually is sold between RM4,000 and RM10,000. It seems that the government wants to encourage sales of new cars and I as a used car dealer in Kuala Lumpur am somewhat affected but the effect outside Kuala Lumpur is worse," he said.

Mohd Rizal also alluded to "false road tax discs" but said it would be below one per cent.

Another used car dealer, in Manjung, Perak, Zulfinaini Safie, said that as a small-time dealer he would be faced with problems as 75 per cent of the vehicles in his dealership were more than 15 years old.

He said various problems will emerge if all the vehicles had to undergo Puspakom inspection for road-tax renewal.

Many owners of old used cars contacted also voiced frustration over the new conditions that would burden the lower-income group.

However, 24-year-old Toyota Starlet owner, Mohd Najib Abd Rashid, said he agreed with the new regulations in the interest of old car owners' safety.

The secretary of the oldskool.org club which has a membership of 4,000 made up of both owners and enthusiasts said what was more worrying was the ban on the import of used car spare parts in 18 months.

"This will make it difficult for old car owners to get spare parts and this is compounded with the difficulty of getting insurance," he said.

Mohd Najib said most of the club members did not agree with the new conditions and hoped the government would find a way to help the low-income owners of old cars. - Bernama – by Jumaiti Rosly

REFERENCES:
1) http://www.nst.com.my/Current_News/NST/articles/20091101151139/Article/index_htmlbbb

2) http://malaysia.news.yahoo.com/bnm/20091101/tts-nap-cars-bm-993ba14.htmlb

That's all folks, thanks for having the time and patience to read this...

Automotive sector – shifting up a gear

SOURCE: THE STAR, STARBIZWEEK.

Saturday October 31, 2009

Brought to you by:
MAYBANK-IB Watch
Maybank Investment Bank
By "faudziah"

Automotive sector – shifting up a gear

THE fresh National Automotive Policy (NAP) measures are a short-term neutral but long-term positive, and offer a decent roadmap to the domestic automotive industry. The policy is pro-investment and embraces liberalisation without hurting the national car plans.

A timetable to phase out approved permit (APs) and the introduction of a vehicle end-of-life policy is commendable. The pursuit of green car development will turbo-charge the industry, if executed well.

The plan to issue new manufacturing licences for selected segments, including high engine capacity cars, with 100% foreign ownership, suggests that Malaysia is heading in the right direction in liberalising its automotive sector, transforming it from pro-national car into a regional manufacturing hub, akin to Thailand.

Interestingly, the policy is structured so that it does not hurt further development of the national car programme and franchise holders. It encourages new foreign direct investments without competing directly with local players such as Proton, Perodua, Inokom, Naza Kia (MPV model only), Isuzu-HICOM and Modenas (motorcycles), predominantly in the below1,800cc (cars) and below 200cc (motorcycle) categories.

Proton stands to gain most as the majority of its products are below the 1,800cc segment, and it can offer contract assembly, as it is currently running at 40% of its production capacity.

Other beneficiaries are Tan Chong Motor Holdings Bhd, UMW Holdings Bhd and MBM Resources Bhd (via 38% and 20% stakes in Perodua).

The timetable to gradually phase out the AP system by December 2015 (open APs) and December 2020 (franchise APs) is commendable. It allows existing AP holders to diversify and venture into other businesses.

Terminating the AP system will encourage development of an auto assembly hub. Beneficiaries are automakers and franchise holders who already have assembly presence in Malaysia, namely Proton, UMW and MBM (via Perodua), Tan Chong, DRB-HICOM, Inokom, and Naza.

Meanwhile, implementing a 15-year vehicle end-of-life, which is akin to the scrapping policy, will benefit the industry in terms of replacement cycle, and ties in well with the measure to introduce rigorous vehicle testing standards.

Policy implementation could be unpopular with the rural/lower income group if no rebates are tied to it. Nonetheless, implementation of a 15-year life-span is still high compared to Singapore (10 years).

We are however disappointed that the current RM5,000 non-cash rebate for trade-in of old vehicles enjoyed by Proton and Perodua owners has not been extended to the other marques.

The green car programme is globally new but could turn out to be Malaysia’s “product champion”, if executed well. The global market offers a potential of 11 million units. The incentives for hybrid/electric car development are on par with Thailand’s, which could entice prospective manufacturers/assemblers.

Thailand has a headstart over Malaysia in attracting green car investments but Malaysia is still ahead of the rest. Thailand has managed to rope in 6 OEMs (Honda, Mitsubishi, Toyota, Tata, Nissan and Suzuki) in setting up the eco-car project there.

Honda will commence production in 2010 and the other automakers will start in 2011 (full capacity by 2015: 700,000 units p.a.).

Proton’s search for a strategic partner is not new but being incorporated into an official policy further validates our view that a foreign partner is needed for its long-term competitiveness. Volkswagen and Renault are among the heavyweight names touted to partner Proton.

An established foreign partner is vital to Proton’s long-term competitiveness as Proton needs (i) technical expertise (i.e model development), (ii) marketing expertise and cost synergies (i.e. higher utilisation at its Tanjung Malim manufacturing plant; currently at 40%, lower R&D costs), (iii) new sales markets.

These synergies would eventually enhance shareholders’ value.

We are surprised that the revised NAP did not clear up the definition of a national car. For the consumers, with no change to sales, import and excise duties, vehicle prices are set to remain unchanged.

We maintain our earnings forecasts for auto stocks under our coverage, as the industry makeover will be gradual. Overall, Proton is a clear winner. UMW, Tan Chong and MBM do not lose out either.

We lift the sector to Overweight following recent upgrades to Proton and Tan Chong. We continue to recommend Buy on Proton (target price: RM5) and Tan Chong (RM3). Maintain Hold on MBM (RM2.40) and UMW (RM6.35).

END OF SOURCE.

References:
1) http://biz.thestar.com.my/news/story.asp?file=/2009/10/31/business/5014538&sec=business

That's all folks, thanks for having the time and patience to read this WONDERFULLY WRITTEN ARTICLE...

Who' s footing the bill? By IZWAN IDRIS

As promised, Article 3 of 3 as published in today's The Star Business. I published here for your reading pleasure. Another WELL WRITTEN, Interesting, NEUTRAL yet THOUGHT PROVOKING, Article. I wish I can WRITE SUCH GOOD ARTICLE, But honestly, I simply can't. NOT AT THE MOMENT... Hats off to the author, "Izwan Idris".

SOURCE 1: The Star, StarBizWeek.

Saturday October 31, 2009
Who’s footing the bill?
By IZWAN IDRIS

"THE Government dished out a whole lot of fresh manufacturing goodies after it reviewed the National Automotive Policy (NAP), which can be described as an attempt to improve on the flawed original.

But with car prices being kept at prohibitively high levels, consumers cannot be faulted if they feel like they are the ones footing the bill to keep the industry alive.

“It was a positive NAP for market players, but not so for consumers,’’ MIDF Research analysts Zulkifli Hamzah and Wan Azhar Mustapa said in their commentary on the industry.

Malaysia is set to remain among the countries with the highest numbers of new car buyers after the International Trade and Industry Ministry said on Wednesday that it would keep import duty and exercise duty structures for motor vehicle at the current rates.

Any price reduction, the Government said, would have to come from the industry.

As it is, most analysts as well as market players, including Malaysian Automotive Association president Datuk Aishah Ahmad, expect car prices to remain the same, at least for the rest of the year.

Under the Common Effective Preferential Tariff scheme, Malaysia must eliminate import tariff for CBU (completely built up) vehicles produced in the region before Jan 1, 2010, to comply with the Asean Free Trade Area (Afta) agreement.

Currently, there is a 5% import duty imposed for CBU cars and motorcycles under Afta.

International Trade and Industry Minister Datuk Mustapa Mohamed said the Government was committed to honouring all its international obligations.

There is a chance for a slight price reduction for CBU car imports from neighbouring countries, but the final sticker price will depend on the respective car dealers’ marketing and sales strategy. One CBU model imported from Thailand into Malaysia is the Toyota Camry.

The Camry comparison


(SOURCE 2).

So how much does a Toyota Camry cost here and how does it compare to the rest of the region, and everywhere else, for that matter?

The 2.4 litre automatic version carries a sticker price of about RM260,000 in Singapore, which is higher compared to RM176,000 for a similar unit at local showrooms.

A check through the web revealed that the Camry is priced at about RM160,000 in Jakarta and just above RM150,000 in Thailand.

Meanwhile, a survey on households by CLSA published recently showed that the Camry in Malaysia has the second highest showroom price tag in Asia, behind Singapore, of course, but ahead of Hong Kong.

The car was priced between US$30,000 (RM102,000) and US$34,000 (RM115,000) each in China, Japan, the Philippines, Taiwan and Britain.

The Camry is the cheapest in the United States and Australia, where the sticker price is less than half of the one quoted at local (UMW) dealerships.

Of course, it can be argued that the actual cost of owning a car varied from country to country after taking into account other things such as fuel, parking fees, regular maintenance charges, road tax and insurance.

Also the same car may actually be of a slightly different specification and styling to suit local needs and conditions.

The Camry model is targeted at executives in most markets. In Malaysia, the Camry competes with MPVs and SUVs at a price range of between RM150,00 and RM200,000.

In the entry-level segment, the cheapest new cars in Asia can be bought in China and India. Most entry-level cars in markets surveyed by CLSA are priced below RM35,000 per unit. In Singapore and Hong Kong, the cheapest new car available starts from RM60,000 each.

Despite the relatively high local new car price, MAA expects the annual total industry volume (TIV) to remain above half a million units over the next three years.

Taxing burden

Under the revised NAP, the Government aims to boost foreign direct investments (FDIs) in the sector, but is careful not to antagonise supporters of the national car makers.

“There are seven policy thrusts detailed in the NAP, and we believe it has managed to successfully balance continued protection for Proton, whilst encouraging FDIs,’’ RHB Research Institute said.

The improved tax and incentives given to automotive components would benefit existing local exporters, as well as attract new players to set up shop in the country.

The prohibition of imported used parts will also force consumers to switch to using products by original equipment manufacturer (OEMs) and replacement equipment makers (REMs).

Meanwhile, there is a plan to gradually phase out older cars from Malaysian roads and to implement more rigorous safety checks on vehicles. However, no deadlines were given.

The MIDF analysts expect the development of the end-of-life vehicle (ELV) policy to be a slow process, given the “sensitive” nature of the issue.

One thing for sure, OEM and REM parts will cost more compared to used items and Malaysians will have to dig deeper into their pockets to maintain their vehicles.

And the prohibitively high sticker price for new cars out there continue to put better quality cars out of the reach of most Malaysians.

Based on current duty and tax structure, the effective rate for the Toyota Camry 2.4 stood at 185% of the CBU price. Basically, more than half of the sticker price at the local dealerships is attributed to duties and taxes.

Exercise and import duties collected from car sales contributed billions to the Government’s coffers every year, with some estimates putting it in the range of between RM6bil and RM7bil annually.

However, it can be argued that the high prices limit the industry’s growth potential. And it is unfair to car buyers to continue shouldering the financial burden of ensuring that domestic car makes remain competitively priced."

END OF SOURCE.

SOURCES:
1) http://biz.thestar.com.my/news/story.asp?file=/2009/10/31/business/5008187&sec=business
2) http://www.toyota.com.my/index.aspx?cat=models§=camry&subsect=gallery

That's all folks, thanks for having the time and patience to read this WONDERFULLY WRITTEN ARTICLE. Again, I REALLY REALLY WISH I CAN WRITE SUCH GOOD ARTICLE. But Not at the moment...

Coming to grips with APs. By IZWAN IDRIS

As promised, another well written article from Today's The Star Business. Article 2 of 3.

SOURCE: The Star, STARBIZWEEK

Saturday October 31, 2009
Coming to grips with APs
By IZWAN IDRIS

THE Approved Permit (AP) system to import cars into the country is often a contentious issue, one that even the Government seems to be having a hard time getting rid of.

Abolishing the well-entrenched system means taking on a group of wealthy bumiputra businessmen, whose strong ties to the political elite makes them formidable opponents.

On the other hand, the general perception is that the AP system is riddled with abuses. And the suspicion seems to be validated by facts.

Recent audits by the International Trade and Industry Ministry (Miti) have come up with the conclusion that a number of AP recipients continue to “misuse and abuse” their allocations.

Minister Datuk Mustapa Mohamed confirmed that some AP holders sold their car import permits to third parties for quick profits. However, he did not elaborate on this. Meanwhile, a check with several re-conditioned car dealerships in Klang Valley yielded claims that forgery of AP documents still goes on.

According to Mustapa, some companies have had their AP allocations for 2009 slashed based on recent audit findings due to various reasons. He added that while no new AP application would be entertained, future allocations would take performance into consideration.

The ministry, however, gave no details on the number of APs issued so far this year and to whom they were given.

In fact, the last time a full list of AP recipients were made public was in 2005, following a huge debate over the issue. That year, names like the late Tan Sri SM Nasimuddin SM Amin of Naza Group, Datuk Syed Azman Syed Ibrahim of Westar Group and a few others made headlines due to the huge amount of APs given to them.

U-turn

The National Automotive Policy (NAP) was first introduced in 2006 and one of the key aims was to abolish the AP system by 2010. But on Wednesday, when announcing the review of the NAP, the Government pushed the deadline to 2015 for open APs, while the franchise AP system will continue to be in place for another decade.

The move to postpone the abolishment of the much maligned AP system was not totally unexpected.

On Oct 23, in presenting his first budget, Prime Minister Datuk Seri Najib Tun Razak said the Government would start imposing a RM10,000 charge for every open AP awarded from next year onwards.

This may be the AP holders’ only concession in exchange for the extension announced on Wednesday by Miti.

“Finally, closure on this issue, hopefully,’’ said Maybank Investment Research head Andrew Lee in his take on the AP system’s new deadline.

The system was introduced in the 1970s as part of a strategy to encourage bumiputra participation in the automotive industry.

In its current form, the so-called open APs are given to bumiputra entrepreneurs to import any vehicles from overseas, while car distributors are given franchise APs, which are restricted according to models and brands.

Miti’s data showed that the number of companies that are eligible for AP allocation stands at 98 today, compared to 254 in 1987.

According to Miti officials, the number of APs issued are limited to 10% of the total industry volume (TIV) recorded the previous year. It is a sort of import control for foreign vehicles sold in the country.

Assuming that the TIV this year will match the Malaysian Automotive Association (MAA) target of half a million units, about 50,000 APs can be issued next year. Of this amount, 60% will be allocated for open APs, while the rest as franchise APs.

The Government’s plan to sell the open APs – they were given free in the past – will contribute as much as RM300mil in revenue every year for the next five years.

A portion of the money will be channelled into a fund to help bumiputra car dealers wean off their dependence on APs.

“It is extremely lucrative and risk-free ... It is easy to see why (AP holders) will not give up the business,’’ stockbroker Kenanga Research said in a recent update issued after the NAP review. The firm estimated that open APs has a “street value” of about RM40,000 each.

Most of these AP holders purchase used cars in overseas markets – the current hot models are the Japanese MPVs – which are then sold here as re-conditioned cars at a good margin.

Post 2015, after the abolishment of open APs, will the quota for AP issuance remain at 10% of TIV? Will the open APs be converted into franchise APs in the period leading to 2020?

One sure thing is that demand for imported cars will remain. Given the capital accumulated over the years and the expertise and network built up, open AP holders can easily transform their business and become official distributors.

The Naza Group is the most well-known among the existing crop of AP holders to have taken this route. Westar is another example.

Today, control of the Naza group remains with Nasimuddin’s family. Over the years, the group has built up its empire to include property and construction, as well as in food and beverage. But the group’s bread-and-butter business lies firmly in its automotive roots.

Another of these so-called AP Kings, Weststar Group, had in June aborted a plan to acquire a British-based van maker LVD Group Ltd. Like Naza, Westar’s car showrooms are situated at prominent locations around the Klang Valley area.

While the two firms were often cited as proof that the AP system had actually work, what about the rest? But the real question to ask is whether an open tender system would be a better alternative?

The deadline for the dismantling of the AP system is a long way off. It was put off before, and it may possibly continue to haunt policymakers for a long time."

END OF SOURCE.

REFERENCES:
1) http://biz.thestar.com.my/news/story.asp?file=/2009/10/31/business/5007860&sec=business


That's all folks, thanks for having the time and patience to read this interesting, neutral (politically-correct), well-written article...