Google Search

Google

Featured Post of the Week

FULL REVIEW: Hyundai Sonata LF Nu 2.0

In this Blog entry, I'm reviewing a Long overdue Review on the Sonata LF Nu 2.0 D-CVVT. You are looking at All new Sonata LF 2.0.  I d...

Saturday, November 06, 2010

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.

No comments: