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Showing posts with label petrol price increase. Show all posts
Showing posts with label petrol price increase. Show all posts

The corridors of power and our power within..

What would be more ironic than to have our fate determined by those in the Corridors of power? We know that the Petrol price has increased and we cannot stop bitching about it. Similarly, we know the price of electricity, water and most essential items will be increased (if not already increased).

We know (though some maybe doubtful) that Anwar Ibrahim is probably gay and is homosexual and we bitch about his sex life as if his sex life is more important than the price of petrol. We know that we as the citizen do not benefit from any policies of Abdullah Badawi (except Abdullah’s family members that we learn from fellow bloggers like Raja Petra- RPK). We know that Najib Tun Razak having spend almost half his life as a cabinet Minister had never made any stand on his own beside yes sir yes sir and we know that his decision is probably the decision of his wife Rosmah which is doubtful if it is any better than Abdullah whom allow the 4th floor to decide for him on almost all Malaysia matters.

But what would be more ironic than that fate that was determined by those in power is to let the power that you have to be out of control. Yes we don’t agree with all the price increases but hey vote against our MPs that passed and did not debate against the price increase in the next general election. That is your power and your right and what is also within your power and control is your survivability which is more important for now. Even if we bitch every second and every hour and every day about the government’s policies, we still have to refuel our car petrol, pay the toll, pay our utility bills and even have to buy chicken when the price doubled up soon. We cannot stop using the car (or use the bicycle like the stupid display of disagreement by the opposition MPs) especially with the lousy public transportation and we cannot stop eating chicken or use candles instead of switching on the light to avoid paying the electricity bill. The next general election to channel our grouses is in another 4 years. What we need now is to survive more than bitching about everything which does not and will not solve anything. Even Anwar is probably busy with boys when he is not debating. Everybody has to survive.

Let us forget for a moment everything that is not in our control and take control of everything that is in our power? Yes, our disposable income! That is what we can control. True our disposable income is much less now with all the price increase whatever the amount is. Soon the government may use the interest rate to manage the economy and that will further decrease our disposable income. Generally, almost 90% of the working population has either a mortgage or a hire purchase loan or perhaps both. More often, 30% of our income per month is spend on the mortgage or house rental, another 30% on hire purchase car loan and another 10% for income tax, EPF and SOCSO leaving only 30% as our disposable income or the percentage that makes up our lifestyle. The 30% disposable income is usually spend on the following categories:

1) Petrol, car maintenance and toll
2) Utility bills (electric, water, astro)
3) Household expenses (Groceries, toiletries and gardening)
4) Healthcare, doctors, medicines, vitamins
5) Shopping and entertainment
6) Savings.

To be able to sustain our current standard of living or disposable income, we either need to (1) increased our salary or (2) have a higher disposable income. The recent price increased in the essentials also affected the cost of operation of our employer and the likelihood of getting a pay revision is highly unlikely. So we are left with only the latter option, to increase our disposable income.

Generally a total of 60% of our income is spent on mortgage or house rental and car hire purchase loan. We can dispose of the house and/or the car or the second house or second car and buy a cheaper one to have more disposable income but this is too tedious. If we want to maintain the same house and car but would like to have a higher disposable income, we can try to refinanced both the car and the housing loan to a longer period. Housing loan can be extended to a maximum of 30 years and car hire purchase loan (depending on year of manufacture) can be extended to 9 years. Most of the Banks now have various package of refinancing housing loans. This is imperative to ensure that the fix percentage of our spending on fix loans is reduced. A car is a necessity and is inevitable given the current state of our public transportation in Malaysia. Refinancing the car loan will ensure that you can service your hire purchase car loan regularly given further increase in the essential items prices.

With all price increases and soon the interest rate too (hopefully not), if we do not refinance our existing loans and fix the interest rate at the current rate which is still low, we may not only have a lower disposable income but we may not be able to even afford the monthly loan repayment. Thus, take action now before it is too late. In 1998 recession, all new loans we frozen and any refinancing of loans (once we are in recessions) will be impossible.

This reduction in fix loan payment per month can ensure we are ready for any inevitable price increase or interest rate variation (given our indecisive government) but it is also best to avoid any other inevitable expenses such as exorbitant car maintenance and health care.

With smaller disposable income given all price increased, any inevitable cost such as car repair or healthcare will further deplete our negligible disposable income and savings. For a start, our driving behaviour can save petrol consumption by more than 30% if we drive slow and do not step and accelerate above 2500 rpm. Driving behaviour is a start but regular car maintenance will warrant any inevitable damage to the car engine which will cost you a bomb. A normal engine lubrication service starts from only RM80 but will ensure the engine is well maintained and this regular engine lubrication service will also save your petrol consumption further which is a great savings in the long term. Proper wheel alignment and balancing will promote greater fuel savings as well as prolonging the wear and tear of any tyres which otherwise will also cost you a minimum of RM200 per tyre change. With a proper wheel alignment, balancing and driving behaviour, a tyre can last more than 20,000km. Unfortunately, the tyre and engine oil lubrication price will also increase as a chain effect of the fuel price increase… it would be good if we, the public, can hedge the tyre and lubrication oil price at the current price to avoid any further increase in the future as lubrication oil and tyres are essential expenditure for car owner. If we can hedge similar to how Airasia hedge their fuel price, then even the public can enjoy the savings by not paying more when the price increase. Yes, I will make sure Fasfik has this package extended to the public so that car owners can hedge their engine lubrication oil price as well as their tyre price fix on the current price. This is important so that you will not have to further reduce your disposable income unnecessarily.

Medical and healthcare is also a pinch in the pocket. It does not cost you much to be healthy but every time you are sick and have to visit the clinic or hospital, there will definitely be an additional cost for the travelling petrol, time and clinical bills. To avoid unexpected sickness, we have to ensure we are always healthy. All that it takes to be healthy is just a regular daily 30minutes exercise. Perhaps 30 minutes run or a walk in your neighbourhood. These 30 minutes run can improve your stamina, increase your body antibody, reduce your cholesterol or sugar level and keeps the doctors away.

Historically, the economic recession is a 10 years cycle with the last recession being in 1998. Since our country is still recording growth, theoretically we are not in recession.. or rather that is what the Government are misleading us to think. Even the CPI is said to be 5% lower than the inflation rate but we know that we are spending more than 30% our regular spending in bill payment (pertrol, electricity etc) and groceries.

Therefore and needless to say, let us not get conned by whatever the government is saying and let us not bitch too much on whatever the government is doing, let us take control and do something with our ownself before it is too late. Afterall, we need to survive..!

Bernama News TV Interview

On Monday morning, I received a call from Laili Rahman, Broadcast journalist from Bernama News TV for an interview on my capacity as the Deputy President of the Proton Edar Dealers Association Malaysia to be aired this Saturday 21 June 2008 on Bernama News TV channel 502 Astro. I was asked to comment on the possible effect on Proton car sales due to the increase in petrol price. The interview was set on Tuesday and we had the interview yesterday but I am sure some of what was said will be censored.

The morning did not start too well with lots of screaming on my end when my Fasfik sales performance did not meet my half month target. I sat with all my Head of Departments and brainstormed on various measures to overcome the shortfall in our sales performance. I only had 30 minutes before the scheduled interview with Bernama and in temperament quickly conclude the brainstorming discussion when Laily arrived. I greeted the charming reporter and began our conversation with what other industry feels with all the price increase. Almost all industry extended a very negative view. The followings are the excerpts from the interview.

Laily Rahman: How do you see the sales performance of Proton's car after the announcement of new fuel prices?

Armin Baniaz: The fuel price increase will not have a major direct impact on Proton car sales as Proton is a people’s car. The bulk of Proton model variances ranges from 1.1, 1.3 to 1.6 cylinder capacity and are economical to use. The petrol price increase may instead improve the sales of Proton cars when the public then realise it is more economical to use Proton cars. For example, Proton Savvy was recorded in the Malaysia Book of Record for the best fuel consumption with 24km per litre.

Laily Rahman: You mentioned that it will not have a direct impact, is there an indirect impact?

Armin Baniaz: Yes indeed. The fuel price increase may affect the existing hire purchase loan repayment due to having less disposable income. The majority of proton customers are from the middle to lower income group and they usually (before the petrol price increase) do not have any extra disposable income. With the increase in the petrol price as well as the price of other essential commodities such as price of chicken, electric bills etc, they may realise then realise that they cannot afford to repay the car monthly repayment. This will increase the Bank’s Non-Performing Loan (NPL) and Banks may be more stringent with hire purchase loan approval that will eventually affect the sales of Proton cars.

With the increased in price of fuel, and the price of some essential expenditures such as electricity, water, even chicken etc.., the lower income earner that comprised of a large majority of the population who also purchased a car under hire-purchase loan usually can only meets end without any further savings or other disposable income. Any increase in essential expenditures, will be the opportunity cost to their current expenditure such as the monthly car repayment.

Laily Rahman: Will the petrol price increase effect the operation of Proton Dealers too?

Armin Baniaz: It should affect both Proton as well as the dealers, the cost of operation will be increased (especially the movement and the logistics of our stocks are cars). Currently, although Proton sales have picked up, but the dealers network is still far from profitable (due to the over-congestion of the dealers appointment). Proton dealers cost of operation is much lower than that of Proton’s own-branch. I can safely assume the dealer’s cost of operation is only approximately 30% of the Proton own-branches. Proton’s own-branches in the aggregate are selling less than double what the dealers are selling, hence there is no way Proton’s own branch are making profit (given the same profit margin as the dealers). It makes more sense for Proton to close some of their branches (rather than subsidising the lost incurred by their own branch) and convert their Platinum branches into a WARRANTY AND AFTER SALES CENTRE to further enhance and signal better confident in their cars to the customer.

For proton to cost-down operation and close their branches. All resources should be channel towards enforcing the neglected Proton IP rights and moulding every dealers towards similar goal without any biaseness to their own branch. The Dealers invested their money and is more sales, customer and profit oriented (being business owner). Nonetheless, the cost of maintaining the sales network will then be borne by the dealers.

Since the inception of Proton back in the 1980s, dealers margin were kept low to ensure long term survivability. However, the Government then under Tun Dr Mahathir, requested other sectors to assist the national carmaker but extending (similar to the developed nation) a ‘Hire-Purchase commission’. Hire purchase commission is a payment to proton dealers for marketing the packages offered by Banks and financial institutions. The hire-purchase commission accounted to 2/3 of our total margin. Profit margin per car was only 1/3. This Hire-Purchase Commission that was first extended ONLY to Proton dealers were open to all car dealers of other makes in the early 1990s and that was when I believe the benefits were abused. In the early 2000, the Central Bank revoked the hire purchase commission but later regulate and impose a ceiling. Proton dealers profit margin per car was never revised (when the hire purchase commission was revoke) though it was earlier kept low with the support of the hire-purchase commission. Todate, there were negligible revision of our profit margin though our rental has increased more than 60% since we commence operation and had spend almost RM1million in total for three times compliance to Proton Corporate Image since 1996.

With the increase in the operating cost such as Petrol, electricity etc… the dealers will incur more losses. All the increase in the operating cost are absorbed by the dealers.

Laily Rahman: Have PEDA written to the Authorities since this is of national interest?

Armin Baniaz: Yes we have. We have written twice to the Governor Bank Negara for the hire purchase commission with a detailed independant study by Ernst & Young benchmarking the dealer's responsibilties pertaining our roles as the agent to the bank and our remuneratoin (hire-purchase comminssion). The Benchmarking was done against developed and neighbouring countries like Singapore, Thailand, United Kingdom, Australia and japan. We have also written to the Prime Minister?

Laily Rahman: What was their response?

Armin Baniaz: there were no response whatsoever from either the Central Bank Negara Governor (or its officials) or the Prime Minister (or its office) and we will write again soon.

Laily Rahman: Do you have any forecast for the next 6 months.

Armin Baniaz: I do not have the overall forecast. Proton would be in a better position to forecast. However, currently most of the model variances are on waiting list!
But overall we expect a total of a minimum 13,000 deliveries per month or an equivalent to approximately 30 cars per dealer that is still not our break-even sales.

Laily Rahman: Do you have any suggestions to ensure sales remain good?

Yes, since automotive is neither the buyers market nor a sellers market but instead BANKER’S LED market, the government (ministry of finance/ bank Negara) should stimulate the automotive sector by allowing the public to restructure their hire purchase refinancing to ensure that the public disposable income that is now affected by the petrol price increase (as well as all other essential expenditure price increase) can afford to pay the monthly repayment. When the public can afford to pay the monthly payment for their cars (given the increase in price for essential expenditure), the bank’s NPL will be reduced and Proton customer risk profile will be adjusted.

PEDA understand that Proton’s customer were categorised as high risk due to fraud loan, big loan default rate or high NPL. But the major cause of the loan default rate, as well as the NPL was the syndication by unscrupulous brokers and sales man. There were previously no measures or supervision of the sales personnel appoinments. PEDA together with Proton had taken the necessary (via centralised registration of all salesman) step to eradicate this practice but if we want to wait for proton customer risk profile to be re-adjusted by the market then we will have to wait for another year or even a few years.


Having taken the necessary step to register all salesman in the network, the bank can rest assure fraud, default rate and NPL rate will be drastically reduced if not eradicated.
If the bank can adjust the customer risk profile now, than our sales can increased by at least 30% (via reducing the current 60% rejection rate due to customers with high risk profile and affordability if loan period is extended)

When PEDA did the ‘gulur tikar’ statement last year or two, our predicament was on the same basis. Yes the uncertainty pertaining to the foreign partner (eg Volkswagen) affected our sales because the pubic were waiting for the newer model line-up expected from the joint venture. BUT the main caused of the decline in sales were due to the Bank’s stringency (Customer RISK PROFILE) and the bank’s valuation of the second hand car in anticipation of the new ‘foreign model’.
SECONDLY, because of historical syndicate to falsify customers documents and the HIGH NPL, Proton customer’s risk profile are higher than other model makes. This will happen again NOW when customer simply cannot afford to pay their hire-purchase loan repayment due to less disposable income as a result from most essential expenditure price increase.

Laili Rahman: Have you heard any complaints/comments from customers regarding new fuel prices? What do you do to explain to them.

Armin Baniza: yes everyday… though the price increase is inevitable and beyond our control (as a citizen), we can mitigate the price increase through changing our driving behaviour, proper car maintenance as this will promote better fuel saving as well as restructuring our finances. For example, refinancing the car or change car to a more fuel saving car.. such as Proton Savvy// 24km per litre- recorded in the Malaysia Book of record. This is important as not only the fuel price is increased but everything from electric, water, chicken etc…. a short term measure is to ensure we can maintain our monthly disposable income.

Laili Rahman: Thank you Armin.

Proton & Petrol Price increase

When the government announce the petrol price increase a few media called me to comment in my capacity as the Deputy President of Proton Edar Dealers Association Malaysia. The first question that they asked was how the dealer's recovery from the downturn... I assume the downturn the media are referring to was the proton dealers 'gulung tikar' headline last year.

Many believe the downturn of Proton Edar dealers was caused by the downturn in the automotive industry pursuant to the announcement and introduction of the National Automotive Policy. yes, true to some extent it does hold some truth. Many too, believe that the downturn of Proton Edar dealers was caused caused by the uncertainties of a foreign partner.. ie Volkswagen. Perhaps that holds some truth too. Many also believe that the downturn of Proton Edar dealers was as a consequence of the poor quality of proton cars. these are all made-believe statements.

The truth is the national automotive policy does not have a direct significant impact to Proton sales but instead, the price and value of the second hand car market was badly effected from the introduction of the NAP. In my 11 years experience as a Proton Dealer, 7 out of 10 customers will want to trade-in their old car (to buy new Proton cars). But this too is not a major consequence of the NAP. Automotive sales are neither the buyers market nor the sellers market. Automotive sales are the BANK'S market. If the bank value the second hand car (or end-finance a higher loan amount) favourably, the used car dealers will be more incline to take the trade-in higher and vice-versa. If the bank so deemed a set of customer profile or a certain car brand, as high risk profile or high risk brand, then the loan approval will be more stringent. thus, the Bank are the culprit of the automotive sales downfall or the dealer's downturn.

Whatever make-believe of Proton Edar dealers downfall was a cover-up of Proton's previous management mistake to over-appointed the dealers as written in my earlier article. Political move to terminate EON as a super-dealer or distributor led Proton Edar to appoint more than 100 new dealers that led to the current predicament. Now, EON operation stay and the Proton authorised sales dealers network is over-congested. A simple rule of nature.. less people more share.. more people less share.. the real fact is.. too many people, there is nothing to share. except losses.

The media continue to ask me if the petrol price increase effect further the predicament of the dealers? or another way to look at it, will the petrol price increase effect the sales of Proton cars?

My answer is NO because Proton is a people's car, with cylinder capacity ranges from 1.1, 1.3 and 1.6, the car fuel consumption is fairly economical. Nonetheless, Proton Savvy is in the Malaysia Book of Record for the best fuel consumption with 24km per litre... yes call me to place a booking now (hihiii..). mind you, even Savvy is on waiting list now...

Thailand historically and currently recorded a higher petrol price (compare to Malaysia) and Thailand too historical and currently has a lower per capita income, or lower per household income. However, Thailand has always recorded a higher domestic passenger car sales. so, the impact of car sales will be negligible if not effected by the increase in the petrol price.

The petrol price increase will affect the disposable income of lower income earner. with toll, monthly car maintenance and now petrol expenses almost double up, the society may experience alot of job-hopping or people may change jobs nearer to their resident or they may change their job to where there public transportation is avail. customer behaviour may change but there will be less impact on car sales.

Henceforth, Proton dealers will not be badly effected with the petrol price increase but will still incur major losses monthly if the sales network is not consolidated or rationalize soon. the consolidation and rationalization in my recommendation, is the re-engineering of all Proton Edar own-branches as per my earlier article.

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