Wednesday, 13 January 2010

MOTOR INDUSTRY: Reinstate cash-for-clunkers



MOTOR INDUSTRY: Reinstate cash-for-clunkers
Submitted by Izat @ Malay Mail on Tuesday, January 12th, 2010

THE Proton Edar Dealers Association Malaysia (PEDA) is positive about this year's outlook despite its many challenges.

Proton car sales will be affected this year by three government policies – spillover from the Second Financial Stimulus introduced last March; the revised National Automotive Policy announced last October; and Budget 2010.
proton

WALK THE TALK: Government needs to go the extra mile to help new car buyers — Filepic

This year will be tough without stimulus or direct policies to support Proton car sales despite the economy being not fully recovered.

However, PEDA is positive about car sales from support extended by Bank Negara and members of the Association of Banks in Malaysia.

Since last July, PEDA has had discussions with both bodies on the approval and disbursement period for car hire-purchase loans, and to alert the authority of any increase in rejection percentage or discrimination on buyers' loan applications.

Proton’s car sales were badly hit in the first quarter of 2009 when the rejection rate for buyers was at an alarming 70 per cent.

They improved after PEDA met with Bank Negara and the banks. Since then, car loan approval and disbursement are made within 36 hours. Proton car sales has been positive and encouraging, despite the recession.

With continued support from Bank Negara and the banks, PEDA is confident that 2010 will be a promising yet challenging year.

The Second Financial Stimulus helped to sustain car sales in 2009 despite the recession through a policy to scrap cars of 10 years or more with a RM5,000 voucher to buy a Proton car which attracted 32,000 applications.

However, funds for the scheme were exhausted by October, seven months after its launch, resulting in only about 15,000 applications being approved while the rest were given an alternative, less attractive offer, which led to a drop of 30 per cent in bookings, especially for Proton Saga.

On top of this, the RM5,000 vouchers for scrapped cars had only been partially disbursed by the government to dealers, further exhausting the latter's working capital.

Momentum gained from the scrapping programme will be lost without any continuity, especially with Malaysia's relatively high average vehicle age. There are two ways that may positively affect the Proton ecosystem from the revised National Automotive Policy.

Firstly, the phasing out of imported used parts and components, including the half-cut, will strengthen the automotive ecosystem. Though cheaper, they come without warranty and many customers have been cheated when the parts they bought did not work easily.

However, the phasing out mechanism is still unknown. The discontinued mandatory annual inspection for vehicles of 15 years and above would have become a platform to ensure a minimum safety standard for Malaysia's relatively high average vehicle age.

The public may have changed or upgraded their cars once they were made aware of their vehicle's condition via the mandatory checks.

This, in turn, would support new car sales.

Steps can also be taken to do away with various charges from becoming a burden to the public, such as allowing insurance or finance companies to pay for car inspections which is in their best interest to protect their exposure.

In the UK, independent workshops can register with the authority to conduct inspections. In Malaysia, Puspakom should not be made the only centre for inspection if mandatory checks are re-introduced.

PEDA urges the government to plough back some of the revenues collected from the automotive industry into the system by re-introducing the car scrapping policy.

With RM5,000 per car collected through sales tax and excise duty, the government would get about RM750 million annually from Proton domestic car sales.

With an average total industry volume of 500,000 passenger car sales a year, the gross revenue contributed by this sector is estimated at RM2.5billion (from sales tax and excise only assuming a RM5,000 average, excluding other indirect contributions).

Except for R&D grants, revenue collected is not ploughed back into the ecosystem to address our stagnant and saturated market.

Malaysia registered almost the same number of passenger car sales in Thailand although our population is four times smaller.

Our population is also smaller than Indonesia and the Philippines, but we registered higher sales than both countries.

If we do not address this issue now, we will not be able to sustain our future sales.

Armin Baniaz Datuk Pahamin
President
Proton Edar Dealers Association Malaysia (PEDA)

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