The Star online. Wednesday May 20, 2009

Group: Set up council to regulate automotive eco-system

KUALA LUMPUR: Proton Dealers Association Malaysia (Peda) yesterday called for the setting up of a statutory automotive council which will regulate and administer any new or revised governmental policy pertaining to the automotive eco-system.

Any issue which is related to the automotive eco-system should be referred to the proposed automotive council, the association said in a statement yesterday.

So far, there was no statutory body that represented the interest of the automotive eco-system although the motor vehicle industry was a significant sector that contributed substantially to the country’s economic growth, acting Peda president Armin Baniaz Pahamin said.

“In the absence of a statutory council to represent the automotive eco-system, the motor vehicle industry will be weaker and will continue to deteriorate,” he said.

Citing the recent proposal by the General Insurance Association of Malaysia on direct rebate for motor insurance, he said the proposal which was approved by Bank Negara, would actually see motor vehicle dealers losing more than 20% income.

”The proposal will destroy the automotive eco-system, specifically the motor vehicle dealer’s network. Motor insurance is an important segment of the automotive eco-system,” Armin said.

He said currently all new and used car dealers were general insurance agents and motor insurance premium generated by car dealers were in excess of RM1mil per annum per agency.

He said these premiums subsidised the increasing overhead cost as well as determine the break-even profitability of car dealers, especially during an economic crisis.

He said bypassing agencies with a direct rebate to customers would contribute to a higher unemployment rate and further weaken the automotive eco-system.

Referring to the motor vehicle industry as “bank dominated market,” Armin said without bank facilities for car vendors and dealers and hire-purchase end-financing for car buyers, the motor vehicle industry would fail.

“Currently, banks are already forcing dealers to switch to their own insurance company by imposing hefty penalties and higher interest on banking facility that does not subscribe to the relevant insurance company,” he said.