Should Malaysia Liberalise Its Automotive Industry After 30 Years of Protectionism?

Should Malaysia Liberalise Its Automotive Industry After 30 Years of Protectionism?

This question is both timely and complex. For three decades, Malaysia has maintained protectionist policies to nurture its automotive sector, particularly in support of national car projects. The debate now is whether the industry is ready to stand on its own or whether strategic protection remains necessary.

Interestingly, protectionism is not unique to Malaysia. The United States, despite being home to some of the world’s largest automakers, is currently reintroducing protectionist policies to safeguard its automotive and electric vehicle industries against global competition. Similarly, China has sustained protective measures for more than 62 years, ensuring that its domestic automotive sector remains competitive and strategically important.

The key consideration, therefore, is not simply whether Malaysia should liberalise, but how and when liberalisation should take place. A nuanced approach is needed to balance global competitiveness, industrial sustainability, and national interest.

NATIONAL AUTOMOTIVE POLICY 2014

NATIONAL AUTOMOTIVE POLICY 2014

Personally, I am disappointed with the recent launch of the National Automotive Policy. The possibility of a cheaper car is as good (or as bad) as the possibility of abolishing the open AP. The copy of the NAP 2014 is available at HERE. 

1. The NAP 2014 is encouraging the re-badging of national cars instead of building our own, with its recognition of PERODUA as a national car. The Intellectual Property Rights for all PERODUA models are not with Malaysians for PERODUA to be called a National Car. 

2. The National Automotive Policy did not provide a clearer framework and a roadmap on the direction the government wants to drive the National Car in terms of producing its own design, chassis and engine.

3. In the past, the government drove PROTON to invest in technology capable of building its own engine, its own car and to move away from re-badging. For years, the dealers had to sell these vehicles with a fragile margin and the public had to pay more for PROTON cars due to a higher cost of production.

4. Unlike previous NAP, which omitted Perodua as a national car, NAP 2014 expressly stated Perodua as a national car, although Perodua is majority foreign-owned and only produces re-badging of already established vehicles. 

5. There is no clear guideline to what constitutes a National Car and non-national, and without it, incentives can be abused. At the moment, the term national car status is subjective, interpreted and understood differently by various parties, even by different authorities.

6. Incentives should only be given to a national car to keep price competitive for the public while investments can be made for a truly born Malaysia made vehicles. If that is still the drive. 

7. NAP 2 has failed (a) to increase bumiputra participation in the dealership network as well as (b) preserving specific segment for PROTON market share, which was part of its objectives. (see: NAP2)

The scrapping of Mandatory Vehicle Inspection

Part of the National Automotive Policy launched on 28 October 2009 was the introduction of a mandatory annual vehicle inspection for all cars 15 years old and above (see: NST). This policy was introduced to ensure its roadworthiness as a requirement for road-tax renewal.

The list of items to be inspected, the cost of inspection, the authorised centre for inspection, or the alternative centre to Puspakom for inspection was never made known and presumably are still a 'work-in-progress' or 'under-study'.

In the United Kingdom, there are various car workshops appointed by the British Ministry of Transport for the mandatory annual inspection. Similarly, in Malaysia, other car workshops (and not necessarily Puspakom) can apply and be appointed to carry out the inspection, similar to the United Kingdom, for the Public's convenience.

Without the list of items to be inspected, the cost of inspection, the list of authorised centres for inspection, various parties had objected to the Mandatory Vehicle Inspection Policy.

Without even finalising the study and mechanism, our Government had, on 6 November 2009, scrapped the mandatory vehicle inspection policy (barely a week after it was launched).

The cost to inspect the car should not be a burden to the public, but the items to repair for roadworthiness cannot be compromised... Thus, the importance of first finalising the items for inspection.

The policy should not be scrapped, but the mechanism should be immediately finalised and made known to the public. If the public still protests thereafter, then perhaps the mechanism can be fine-tuned rather than entirely scrapped before any finalisation, which will only signal a FLIP FLOP Government.

Nonetheless, it is our safety that is at stake.

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NAP Review Addresses Most Issues In Auto Eco-system, Says PEDA

October 28, 2009 19:20 PM

NAP Review Addresses Most Issues In Auto Eco-system, Says PEDA

KUALA LUMPUR, Oct 28 (Bernama) -- The revised National Automotive Policy (NAP) has addressed most of the predicaments in the automotive eco-system, says Proton Edar Dealers Association Malaysia (PEDA).

PEDA's president, Armin Baniaz Pahamin, said the policy addressed three main aspects imperative to the Proton ecosystem.

"In particular, it addressed the conflict of the two national car makers competing rather than complementing each other, and provides a pragmatic future direction towards Free Trade Agreement (FTA)," he said in a statement here.

"It specified the importance of Bumiputera dealership in the network and the critical issue faced by the vendor, and it also addressed the overall saturated and stagnant automotive market."

Armin Baniaz said the public will benefit from the economies of scale gained from preserving specific market segment in the domestic market share for Proton.

He said that although the second national car project, launched in 1994, was meant to complement Proton and expand the local automotive product range, they were both now competing in the same market segment and dividing the market share.

"This had led to a lower production (for vehicle in the same segmet), under-utilising the production capacity by both manufacturers in a stagnant if not deteriorating market segment," said Armin Baniaz.

PEDA also lauded the clear directive to increase Bumiputera participation in dealership network.

However, the existing 100 per cent Bumiputera owned dealership that is currently a minority with a total of less than 20 per cent in the dealers network, should be preserved and nurtured, said the president.

The tax/duty exemption on the value of increased Exports of Vehicle and Parts/Components and the gradual removal or reduction of import duty, meanwhile, will be a catalyst to attract a strategic partner for Proton.

The mandatory annual inspection for vehicles above 15 years as a first step towards implementing a Vehicle End of Life Policy is a good move and in line with other developed countries, the association said.

However, PEDA hoped that the scrapping policy that was introduced under the second financial stimulus should be continued especially with the momentum that has picked up.

"Although the quantum offered to scrap 10 years and older vehicle is low but it should be an option given Malaysia's relatively high average vehicle age," Armin Baniaz said.

"The scrapping of old cars is important for our automotive industry that is now quite saturated. The introduction of Vehicle End of Life Policy will address our saturated automotive market as well as vehicle road worthiness and environmental issues."

The phasing out of imported used parts and components including the half-cut will then benefit all parties from the public, Proton vendors as well as the authorised service dealers, he added.

-- BERNAMA

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