Buying a car in Malaysia is an expensive affair. Besides a place called home, car is perhaps the biggest commitment to an average Malaysian. It’s not a fairy tales anymore that an average-Joe could be spending the rest of his life paying installments for his home and car. And we’re not talking about bungalow with swimming pool or a BMW, mind you. When the AFTA (Asean Free Trade Area) was mooted in 1992 and as date nearing the 2010′s actual implementation, many were grinning from ear to ear hoping to buy a “quality car” at a more affordable price. It never happens.
Dollar for dollar, people are still wondering why locally designed and built cars are still more expensive than imported foreign cars in the same class. At 1.6-litre segment, a latest 2012 Ford Fiesta cost about US$16,000 in U.S. but a local Proton Persona cost a whopping RM49,000. A new 2012 Toyota Camry 2.5-litre in United States cost merely US$30,000 but it is costing you a leg and an arm at RM183,000 here. Hence an American with monthly salary of US$3,000 could own a Camry with his 1-year salary while a Malaysian requires about 5-year salary to own the same car, dollar-to-dollar speaking. Even after converting to Malaysian Ringgit, the Camry should cost you roughly RM90,000 instead of RM183,000.
If you’ve been living in the cave for the last 30-years, Malaysia’s automobile sector is protected from foreign competition by barriers of investment-approval permits, differential excise taxes, import duties, sales taxes and whatnot. It was a beautiful multi-layers of barricade specifically architected and designed by none other than former premier Mahathir Mohamad to protect Proton, his pet project. For years since the 1983 National Car Policy, Proton made tons of money thanks to the protection policy – the local automaker became Asean’s largest car producer in the process. Proton became arrogant and didn’t care about qualities so much so that its local buyers were left without any solution for decades about its once-infamous-power-window problem.
Then in 2001, came (former) Thailand Prime Minister Thaksin Shinawatra who formulated Thailand’s master plan for industrial development – of which “Detroit of Asia” was part of it. Little did Mahathir and his regime realize what would hit their “Jaguh Kampong” Proton. By 2003, Thailand overtook Malaysia as the top vehicle producer in the region but Malaysian ministers were still in denial mode and pooh-pooh the “Detroit of Asia”. Nevertheless, National Automotive Policy (NAP) was introduced in 2006 to arrest the decline in Malaysia automotive industry but it lack real substance.
By the time Malaysian government (reluctantly) realized the consequences of Thailand’s little Detroit’s impact, it was too late. Thailand’s durian orchards have been transformed into small city making vehicles for export to over 200 countries. Toyota, Honda, Nissan, General Motors, Mitsubishi, Suzuki Motor and Ford Motor are some of the giant manufacturers manufacturing or are in the process of doing so (by 2012) in the automobile cluster in Rayong which have 25,000 employees. To make matter worse, Indonesia’s vehicle production quietly overtook Malaysia by 2008. In 2010, Thailand led Southeast Asia in total vehicle sales with 800,357 units, compared with Indonesia’s 764,088 and Malaysia’s 605,156.
And now the excitement (sort of) is back – the revised NAP scheduled to be revealed end of Apr 2012 with the objective to supposedly plug the holes from the first version of failed NAP. Of course the main attraction here is the possibility of liberalization in the lucrative 1.8-litre segment. Players who could benefits tremendously if such liberalization is adopted will be carmakers from South Korea such as Hyundai and China’s Chery. It could also attract other manufacturers such as Audi or Alfa Romeo. So we could see more models and price pressures from this event and this is perhaps the first reason why you should hold on from new purchase.
DRB-Hicom has just acquired Proton and the current Proton’s MD Syed Zainal, the person credited to the success of new Proton Saga and coming Proton Prevé, is rumoured to be resigning. DRB-Hicom COO Lukman Ibrahim who once held a top managerial position in Perodua is said to be the replacement. DRB-Hicom currently assembles Volkswagen Passat with Jetta and Polo in the pipelines. The question is whether DRB-Hicom under the new leadership will rebadge some of Volkswagens as Proton models as in the case of Proton Inspira, the carbon copy of Mitsubishi Lancer.
Judging by the delay in NAP revision due to DRB-Hicom’s acquisition of Proton, the new owner has to do something to plug the continuous losses in Proton and what better way than to take the easy way of rebadging? If you’re not in a rush, this is the second reason why you should wait, at least for couple of months, before making a new purchase. One has to remember that tycoon Syed Mokhtar Albukhary is a businessman and his objective is to make money soonest possible. Therefore, it’s likely DRB-Hicom may attempt to kill two birds with a stone by re-badge Volkswagen with Proton’s ThunderCat logo. And if DRB-Hicom intends to sell off loss-making Lotus, which is long overdue, then there are more reasons to do (re-badge) so, no?
Third reason to hold from any new purchase at this moment is related to Toyota and Honda cars owners’ wannabe. You’ve seen how UMW-Toyota tries to rip you off with pricier, uglier and low technology new Camry scheduled in June. Chances are the sales would be dull judging from the huge criticisms. On the other hand, Honda is expected to launch its new Civic in June, follow by CRV. Already, the new Civic has attracted international criticisms which saw its designers sent back to the drawing board. But if there’s one consolation prize from Civic over the Camry, it is the coming Civic’s Hybrid option. Why not give both new Toyota and Honda’s first release a pass and wait at least for the facelifts?
Another area of interest in the coming 2012 NAP is hybrid. The tax exemption provision for hybrid cars which will end in 2013 may get an extension. From what FinanceTwitter have gathered from Honda’s insiders, the road-map for future Honda cars will be in the hybrid market, although (greedy) Toyota prefers to squeeze the last drop from Uncle’s juice instead of bringing Camry hybrid to the market (*grin*). Auto parts suppliers and manufacturers could be encouraged into the hybrid market to differentiate Malaysia from Thailand and Indonesia. Needless to say, you should wait for such revelation before you commit yourself a new car, shouldn’t you?
The fifth reason is related to ridiculous high import duties or excise duties. Both import duties and excise duties constitute 85% to 135% (CBU and CKD) of the overall price of foreign built cars in Malaysia. Thanks to the government’s protection policy and poor governance, the cost of car ownerships has skyrocket, so much so that the once 5-year installments had mutated to 7-year, 9-year and even 11-year, before Central Bank interfered to cap it at maximum 9-years. Even then, fresh graduates find it hard to afford a new car. Hence you may want to wait and see if the government will reduce the said duties to make car ownerships more affordable, especially in the low-capacity engine cars.
If you’re currently driving that 15-year-old Proton junk and would like to get a new Proton Prevé, or you’re currently driving that 10-year-old Honda City or Toyota Vios and would like to upgrade to a Volkswagen, or you’re simply thinking of disposing your Accord or Camry for a new BMW 3-series, you may want to think again as the economic outlook is not that rosy after all, unless you have tons of loose change for such purchase. U.S. stubborn unemployment, Europe’s economic crisis, possible Iran war, China’s property bubbles and whatnot could spark further global economic slowdown this year thus another reason why you should adopt a wait-and-see approach for the time being.
The seventh reason will be the coming general election. Najib administration has been fighting a losing battle trying to win over the more educated young voters, who will determine who will walk the corridors of powers. This group of internet-savvy is the hardest to please and with escalating cost of living, it would be foolish if PM Najib doesn’t take advantage of the revised NAP to give away some candies. Opposition de-facto leader Anwar is already scoring important points with his proposal to scrap the National Higher Education Fund (PTPTN) over the young voters. It would be fun if Anwar can promise an AP (approved permit) for each and every individual if the opposition wins the federal government (*tongue-in-cheek*).
OK, some of the above reasons may be wishful thinking. However, looking at Malaysia’s total vehicle sales from 1980 to 2011, obviously it has reaches saturation stage. In order to register higher sales figure, Malaysian government has to stop telling the world what they can’t do yet bitching about declining sales and quarters of (Proton) losses. Gone are the days when Malaysia can (arrogantly) dictate what foreign manufacturers can produce. If they are serious about competing with Thailand and Indonesia, they’ve no choice but to invite more foreign manufacturers into the country with more liberalization. Foreign carmakers do not need Malaysia to survive but the same cannot be said about Malaysia.
Malaysia has to honour what it promised. The government promised to abolish APs by 2010 but has since pushed it to 2015. The government also promised EU4M diesels to be introduced in 2011 but nothing happens and the poor BMW actually thought Malaysian government was serious about it so much so that they actually launched clean diesel models ahead of the date. Now, every foreign car manufacturers know they can’t trust current Malaysian government at all. Will we see a tsunami in the automobile industry soon? Maybe we shall wait for the NAP 2012 and the coming general election before decide whether it’s wise to book a new car.