The Star: Used car sellers hit by margin squeeze

The Star Business: Saturday November 6, 2010

Used car sellers hit by margin squeeze

THE local automotive industry may be on an up and up this year in terms of total industry volume, but many used car dealers feel that margins are being squeezed due to increasing competition.

“There are already too many cars and models in town. If you look at the average classified advertisement for used cars, there are more sellers than buyers,” says a Kuala Lumpur-based used car dealer.

Tan, a Kuala Lumpur-based used car dealer concurs, says that with new players coming into the market, there would be more vehicles in the market and competition among used car dealers or grey importers would be more intense.

Early last month, the Government said it was evaluating the possibility of granting manufacturing licences to five foreign automotive assemblers with the view of allowing them to operate locally, and would make a decision by year-end.

The Government already granted a manufacturing licence to Berjaya Corp Bhd, which is keen to assemble one-litre right-hand drive cars in Malaysia with China-based BYD Auto Co Ltd.
Grey importers bring in both new or used motor vehicles and motorcycles legally from another country through channels other than the maker’s official distribution system.

“Competition is already tough and will only get stiffer next year. With locally assembled cars, prices will be cheaper and a lot of customers, if given a choice, would prefer to buy a new vehicle than an old one.”
Chong, a Klang Valley-based used car dealer says sales this year had been relatively flat compared with 2009.

“Sales for the remaining months of the year are expected to be slow as customers prefer to wait for the new year so they can gain better resale value for their new cars.”

Separately, although he says the abolishment of the open approved permit (AP) system by 2015 is a good move, he feels that it still might not happen.

Under the reviewed National Automotive Policy (NAP) announced late October last year, the open AP policy to import used vehicles will be scrapped by Dec 31, 2015.

Franchise APs, meanwhile, will be terminated by Dec 31, 2020.
“I feel it’s still a question mark and will carry on,” says Chong.

During Budget 2010 last year, the Government also proposed that open APs no longer be sold for a measly few ringgit, instead slapping a RM10,000 fee for such a document. “The RM10,000-fee is a burden on used car dealers as it costs about RM50,000 for an AP. If it’s a high-end car, it could cost more,” he says.

Lam, a used-car dealer from Perak, is also looking forward to APs being abolished but is skeptical.
“Cars in Malaysia are ridiculously expensive and it’s time that APs be abolished. But will it happen? I’ll believe it when I see it.”

The Association of Malay Importers and Traders of Motor Vehicles Malaysia (Pekema) is, however, hopeful that APs are maintained.  Vice-president Sharifah Noor says auto players dependent on APs will be hurt as they had invested considerable sums in the business.

“Abolishing the APs will definitely have an impact on our members,” she says, adding that the AP system has helped create many bumiputra entrepreneurs in the automotive business.  “The automotive business is our members’ main income stream and a springboard for them to venture into other businesses.”

Earlier this 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 review the policy to end the AP system.

Pekema Sabah chairman Rozman Isli was quoted as saying that 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 is currently in talks with the Government to split payment of the RM10,000 levy into two parts to make it easier for its members.

“It’s still being finalised,” she says.

END OF ARTICLE.

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SOURCE:
http://biz.thestar.com.my/news/story.asp?file=/2010/11/6/business/7341035&sec=business