Scrap Policy Scrapped by December 2009

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Today's New Straits Times reported the RM5,000 rebate provided under the 2nd Financial Stimulus RM60billion budget will be withdrawn in 5 months time (See: NST).

The government allocated RM60billion under the 2nd financial stimulus with the objective of stimulating the current economic downturn. The budget for automotive industry was only 0.3% from the RM60billion or RM200m allocated to the automotive development fund (see: MOF). The budget for the scrapping policy is part of the RM200million allocated. Todate, the disbursement or utilisation of the RM200m is unknown.

1. The scrapping policy was introduced as a short-term measure to sustain (without further deterioration), improve and even stimulate the automotive sales during this recession. The scrapping policy did not fully achieve the desired objective.

2. The scrapping policy is beneficial to build resilience to the automotive industry in the long run and not as an immediate stimulus. The current automotive industry with an already 2 car per household will soon affect the overall future car sales when the market is more stagnant without older cars being scrapped. Even todate, there are already an excess supply of second hand car in the market.

3. There were many scrap car applications that did not qualify under the Proton minimum car condition for scrapping, signalling a critical condition of vehicles being driven on Malaysian road (See: Proton scrap terms, Perodua Scrap). If these 10 year old car that is not-road-worthy is not mitigated, it will endanger other road users.

4. The scrapping of 10 year old cars is a good policy but not with an immediate result. The government should continue the scrapping policy for long term benefit (perhaps under a different budget). When the policy was introduced, the public took awhile to digest and understand the new policy but slowly there are demand for the public to scrap their old.

5. Without the scrapping policy, there should be more fund available from the RM200million budget allocated under the 2nd financial stimulus to be utilise for other better immediate measure to stimulate the automotive sale.

6. Before the government introduced the scrapping policy, Proton had already launched the Exchange Programme (similar to the scrapping policy). Now, Proton will probably continue the Exchange programme for selected models similar to the original program.

7. There are other external factors that may mitigate the success of the scrapping policy such as no infrastructure for scrapping when the policy was introduced. UEM, the appointed company to scrapped the vehicles were only collecting the scrap cars without scrapping them. Even now, the scrapping stockyard and all Proton showroom are flooded with old cars awaiting the pick-up for scrapping.

8. Without the car being scrapped, JPJ will not de-list the scrap car from registration. The government will only issue rebate payment upon JPJ de-listing the scrapped cars. Further aggressive campaign will probably affect both Proton and Perodua cashflow.

9. The scrap metal price was at the highest when the scrapping policy was introduced but now, the scrap metal price has drastically reduced probably signalling a short-term adverse viability to pursue the scrapping policy or for UEM to scrap the cars.

10. The objective of the scrapping policy should be re-looked and not limited as an immediate measure to stimulate the automotive sales. The safety of the other road user that may be affected by the not-road-worthy old cars and environmental friendliness should part of the scrapping policy objective.

11. To ensure a long term success, the scrapping policy should be driven by an independent organisation at the behest of the government, rather than being driven by Proton or Perodua with commercial but not the public's interest at large.


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