Assurances needed from revised automotive policy

International Trade and Industry Minister Datuk Mustapa Mohamed on Wednesday announced the keenly awaited National Automotive Policy (NAP) review, which has drawn mixed response.

INTERNATIONAL Trade and Industry Minister Datuk Mustapa Mohamed on Wednesday announced the keenly awaited National Automotive Policy (NAP) review, which has drawn mixed response.

Measures to be implemented under the revised NAP include termination of open approved permits (APs) from 2015, stopping imports of used cars from 2015 and used vehicle parts from June 2011, and allowing 100 per cent foreign ownership of manufacturing outfits that make luxury cars of 1,800cc and above and with an on-the-road price of at least RM150,000.

Affin Investment Bank said in a report that most of the measures, while positive in navigating the industry towards greater liberalisation and competition, were not significant enough to alter prevailing industry dynamics. The scenario, duties and, ultimately, car prices have not changed.

"The government's stance, in our view, is one of measured liberalisation, which is consistent with its stated objective of ensuring an orderly development as well as long-term competitiveness and capability of the domestic automotive industry as a result of market liberalisation," it said.

OSK Research, meanwhile, sees national carmaker Proton Holdings Bhd as the immediate beneficiary given its available capacity for potential vehicle manufacturers to capitalise on. Other beneficiaries are the Tier-1 parts suppliers as the industry consolidates further with the enforcement of mandatory standards on parts and components.

The decision to maintain current import duties of all completely built-up (CBU) and completely knocked-down (CKD) vehicles means car prices will not fall, which is good in a way because it averts a sudden fall in second-hand car prices and will not affect new car sales, as occurred in 2006, OSK Research said.

However, if the intention was to remove the duties gradually, it would be good to have more details on the staggered reduction in duties so that those affected - second-hand car sellers, local car manufacturers, investors, potential buyers - could better plan ahead and not be caught off-guard.

There has also been criticism of the move to make it mandatory for vehicles that are 15 years old and above to be inspected annually to ensure their roadworthiness and as a requirement for road tax renewal. This is the first step towards implementation of a full end-of-life vehicle (ELV) policy.

The main grouse is the additional cost to affected owners from having the car inspected every year before road tax renewal. The phasing out of old vehicles in other countries is normally accompanied by some form of subsidies or incentives to ease the burden. It is unclear if Malaysia will follow the same route. Perhaps it can be considered when the Ministry of Transport formulates the roadmap to reach full implementation of the ELV policy.

Another initiative which could have a more immediate impact is the plan to do away with imported and used spare parts outfits. The aim is to develop more local parts manufacturers and achieve higher localisation of car parts. This is scheduled to happen within 18 months.

Who has not negotiated with their regular mechanic over the pricey components that need to be replaced due to regular wear and tear or breakdown, and in return are offered cheaper alternatives from used cars (kedai potong) or OEM (original equipment manufacturer) imports?

As consumers, we are aware of the limited lifetime or warranty that comes with spare parts not sourced directly from the vehicle manufacturer, but when every ringgit is precious in these difficult times, there is often no other alternative.

Will consumers be guaranteed affordable parts and components when they are manufactured locally? Will all the parts and components be available? How many local manufacturers will need to be established before June 2011 when the ruling takes effect? Will there be enough supply?

The NAP needs to address these questions and give some kind of assurance that its initiatives will also take the interest of car owners and consumers into consideration, and not just that of car manufacturers and the related industries.