Used car dealers the worst hit?
By CHOONG EN HAN
han@thestar.com.my
Players hope for gradual reduction in car
prices should National Automotive Policy be implemented
PETALING JAYA:
Industry players are hoping the reportedly gradual car price reduction in the
upcoming National Automotive Policy will be of minimum impact to the current
automotive industry, in particular the used car sector.
“These are all
hearsay right now, but the impact on the industry would be extensive if this
turns out to be true. Details need to be known before we can project anything.
Right now we can only assume,” said a reputable industry source who declined to
be named.
He said the used car
sector would bear the brunt of the move as cheaper new cars would impact the
resale value of second-hand cars, and used car dealers would have to shoulder
the burden of squeezed margins and even losses should new car prices
drastically affect the value of existing stocks.
“The price reduction
would be great for consumers and the industry if it is done well, otherwise it
would change consumer patterns, where car buyers would put off their purchase
plans. Should that happen, it might drive the industry to a grinding halt,
slowing car sales and that would possibly have a rippling effect on the
economy,” he said.
Impactful: Cheaper new cars will impact the resale value of
second-hand cars.
With the
possibility of cheaper cars due to the NAP, some concerns and questions were
raised particularly on how the authorities would implement it.
Market talk
indicated a sort of mechanism would be in place to address the gradual
reduction of car prices in the country. A source indicated the public could
expect reduction of 5%-15% on a gradual basis until 2015. However, details are
still scant pending the official announcement of the NAP.
Take for instance,
if a Japanese marque car is priced at RM80,000 now, it may be trimmed to
RM68,000 via the reduction in excise duty and sales tax.
The Government
is also said to be contemplating on implementing the end-of-life vehicle
policy, which was scrapped in 2009 after a huge public backlash just after the
announcement of the move.
“It might be
made as non-mandatory for the first few years, and subsequently be made
mandatory depending on public feedback. The public should look forward to this
as it would promote usage of safer vehicles,” said the source.
Although the NAP is
reviewed again, the Government had said it would maintain the termination of
the Approved Permit (AP) system starting end-2015. The Government will stop
issuing open APs from Dec 31, 2015 while the franchise AP will be terminated by
Dec 31, 2020.
Started in the
mid-1970s, the AP system was once a platform to encourage bumiputra
participation in car distribution. However, the often-abused system has become
a major hurdle for the liberalisation of the local automotive industry.
RHB
Research analyst Alexander Chia said the industry needed to be
restructured over a gradual period to ensure that the market continued to grow
going forward, adding that market participants (car buyers, lenders, dealers
and distributors) would have to adapt to this transition phase in the next five
years, and not just buyers and dealers.
“Used vehicle
residuals could be vulnerable as the market tries to find a new level. The lack
of policy transparency could result in volatility of used residuals that could
also adversely impact new vehicle sales since used residuals typically form the
down payment or equity for a new vehicle,” he said.
He said structural
impediments to the continued growth of the domestic auto market included high
vehicle prices (relative to income) and was a product of the present duty and
tax structure.
“The total industry
volume is already close to saturation. Look at the statistics on household
debt. Malaysia is possibly the only country to have hire purchase loans
stretching up to nine years. The Government needs to communicate its policy
effectively to the market to ensure there is no misconception. Misconception
and conjecture could lead to irrational behaviour among market participants,”
he said.
Source
: The Star
Date
: 27 August 2012
Today's Pick
(27/08/12/150/843)
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