Hornbill Unleashed

July 26, 2012

Cheaper cars under Pakatan

Filed under: Politics — Hornbill Unleashed @ 12:00 AM
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G Vinod

Rafizi says the coalition will phase out excise duties on cars if it gets to Putrajaya.

Cars prices will go down if Pakatan Rakyat takes over the federal government, PKR strategic director Rafizi Ramli said today.

Pakatan would review the National Automative Policy (NAP) towards reducing the market price of cars, he told a press conference at PKR headquarters here.

“We will work on a mechanism for this and include it in the Pakatan Rakyat manifesto for the general election,” he said.

High taxation is the reason why cars are so expensive in Malaysia. Currently, according to Rafizi, Malaysians pay 70% in taxes when they buy locally-made cars of below 1,500cc.

“Buyers end up paying almost RM16,500 in excise duties and sales tax for a car worth RM40,000,” he said.

“On top of that, car owners also pay about 4% in interest for the loan.”

According to his estimation, a typical car owner in Malaysia pays nearly RM600 a month towards settling his car loan. Toll charges and the cost of petrol would take up another RM400 of his monthly income.

Rafizi said Pakatan would phase out excise duties on cars to reduce household debt and increase disposable income.

“Even a novice will understand that the impact of increasing disposable income is something like increasing their pay. It’s easier to achieve than having projects under the Economic Transformation Plan (ETP) as the latter depends on external factors.”

High car instalments

Citing the Statistics Department’s Household and Basic Amenities Survey Report 2009, he said 53% of Malaysian households earn less than RM3,000 a month.

“The report also shows that 71.9% of Malaysians own a car,” he said.

“High car instalments have become one of the reasons Malaysians are burdened with huge debt.”

As of May 2012, car loans repayment ranked second highest in household debt, standing at a staggering RM134 billion, he added.

“Car ownership has become a necessity to Malaysians due to the government’s lackadaisical attitude in improving the public transport system,” said Rafizi.

He conceded that BN leaders would accuse Pakatan of introducing populist policies.

“They will accuse us of being populist, but a few months later, they will copy our policy. Let’s see how they will reduce car prices,” he said.

 

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5 Comments »

  1. A Toyota Camry 2.4 and a Honda Accord 2.4 should not cost more than RM75,000 in Malaysia.

    Comment by Irene Kana — July 28, 2012 @ 9:44 PM | Reply

  2. The decision for a much cheaper cars in Malaysia is long over due. All non tax paying working adults had to spend about 4o% to 60% of their income just to service the vehicle hire purchase. Already they are earning less than RM3,000 a month and a big chunk of the salary goes into owning and maintaining a car.

    Comment by Zainuddin — July 26, 2012 @ 4:36 PM | Reply

  3. Malaysians will vote for good governance and a corrupt free government. Malaysians will vote for a government initiated affordable homes. Malaysians will vote for cheaper cars. Malaysians will vote for free tertiary education. Finally Malaysians will vote out UMNO controlled BN.

    Comment by Mata Kuching — July 26, 2012 @ 2:34 PM | Reply

  4. Our cars are costing us our homes
    Food for thought
    By DATUK ALAN TONG, The Star, Saturday July 14, 2012

    Our cars are costing us our homes
    Car and home costs relative to fresh gradautes’ salary

    WHEN I first started my job as an architect in the 1960s, I was on a three-year contract with a monthly salary of RM628. I bought my first car, a Peugeot which cost RM7,724, equivalent to approximately one year of my salary. The car became my reliable companion for 14 years. Those were the good old days, when a car could be bought with just one year of a fresh graduate’s salary.

    Circumstances have since changed. Today, for a fresh graduate to own a car in Malaysia, it will easily cost him four years of his salary to purchase a foreign car, and even a local car costs around two years of his salary. If we take into consideration his living expenses and other commitments, it may take him even longer to settle his car loan. Hence, it has left him with very little option but to take the maximum car loan financing tenure of nine years.

    In the table illustration below, a fresh graduate in the Washington D.C. earning about RM11,000 (about US$3,500) per month can easily buy a Japanese Honda Civic or Toyota Corolla worth RM50,000 as it is only 0.4 times of his yearly salary.

    On the other hand, a fresh graduate in Malaysia earning about RM2,500 per month needs to pay RM120,000 if he would like to buy the same type of car. It costs him four times his gross yearly salary. This ratio is 10 times higher than his US counterpart.

    For youths in Malaysia, buying a car is more expensive both in real terms, and in terms of debt-to-income ratio. In reality, it means they have to either purchase a car with lower price tag or commit to a longer term loan to own a car, which cost them the opportunity of owning a home.

    This situation requires our youth to choose between buying a car or a house first, and many have committed to own a car first, considering our public transportation system is still in the process of being improved.

    Many fresh graduates in Malaysia who start to serve their car loan tend to delay their plan of purchasing a home.

    Unfortunately by the time they can afford to purchase a home, be it three, five or nine years later, the price of a property would have escalated due to among other things, inflation, higher construction cost and higher land prices.

    While it may be safe to say that their salary would also increase, generally speaking the increment may not aligned to the rate of inflation. In most cases, owning a home will be a huge debt lasting 30 to 40 years of housing loan repayment.

    What can be done differently to change the circumstances? Is there a better way for them to financially plan their future? These are questions that Malaysian youths ought to consider before purchasing any big-ticket items.

    Let’s look at the table again. It also lists the median price for three-bedroom apartments in the suburbs of these cities. The median price of an apartment in the Klang Valley is around RM300,000, equivalent to 10-year gross income of our fresh graduates. The affordability level is more favourable compared to other Asian countries, such as Indonesia and Thailand. The prices of same size apartments in Jakarta and Bangkok range from RM350,000 to RM400,000, and costing their fresh graduates 13 to 18 years of gross yearly income to purchase a house.

    Therefore, when it comes to the question of home affordability in Malaysia, we are blessed compared to our regional peers.

    However, there are many factors that contribute to the challenge for our youths to own a house. Two primary factors are the additional financial commitment of purchasing a car, and the relatively lower income level in our country compared to our Western counterparts.

    When fresh graduates spend a substantial amount of their salary paying for a car, they are left with little savings to own a house, and their house affordability level decreases over the years as prices rise due to inflation.

    Clearly the income level of our graduates has to rise, to enable better quality of living and higher affordability level, which is the current government’s focus to make Malaysia a high income nation by 2020.

    Perhaps it is also time to re-look at our national car policy and how it has affected the house affordability level in Malaysia. From the numbers above, it is clear that our cars are costing us our homes.

    > FIABCI Asia Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He was FIABCI World president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties. (email at feedback @bukitkiara .com)

    Comment by Teddy Gumbang — July 26, 2012 @ 10:13 AM | Reply

  5. Malaysians are paying too much for cars, money they could be using to increase quality of life
    The Star, Saturday June 23, 2012
    A QUESTION OF BUSINESS
    By P. GUNASEGARAM

    IT has been reported that the National Automotive Policy (NAP) will be reviewed. But unless the review addresses the problem of the high price of cars in Malaysia and reduce the burden on Malaysians, it will yet again be an abject failure.

    As soon as the first Proton – the Saga – rolled off the production line in 1985, something happened to car prices – they started rising and in a matter of mere years, they were higher than most places in the world, sometimes as much as twice the price of cars in other markets.

    I recall buying a brand new Mazda 1.5 hatchback for RM16,500 in 1982 but when I bought a Proton 1.3S in 1988, an inferior car to the Mazda in terms of comfort, space and performance six years later, the price had gone up to nearly RM26,000 or about 60% more – everything else in the same range was considerably more expensive.

    The underlying reason for that was, simply put, tariff protection. To ensure a market for Proton cars, astronomical duties were imposed on imported cars – sometimes a 100% or more – and a similar but slightly less onerous fate descended upon locally assembled cars.

    The upshot of all this was that soon after Proton had an iron grip on the market with four out of five cars sold being Proton. Look to the left and there is a Proton, look to the right and there is another, look behind and there’s one more and the one coming right towards you is yet another one. And what’s the other car I see, looks like a Sunny (Nissan).

    That was the scenario for quite a while and then another Malaysian national car manufacturer was set up in 1992, Perodua, with technical help from Daihatsu of Japan, a Toyota subsidiary. Meantime, Proton was trying hard to get its own capability up and dissolved its partnership with Mitsubishi, which had resulted in a very reliable first generation Proton based on the Mitsubishi models.

    From Government hands, ownership passed to private hands and a dalliance began with other manufacturers including Citroen which resulted in something called the Tiara based on an out-dated Citroen model. Models proliferated, suppliers were squeezed, quality was beginning to be affected and problems began to appear.

    Proton went back into Government hands because the private owners could not hack it anymore, first Petronas and then Khazanah Nasional. An own engine was introduced. Quality dropped further and Perodua made inroads. Eventually Perodua overtook Proton as the main brand in the country.

    There was a near-miss tie up with Volkswagen, which would have ensured Proton and the Malaysian car industry a bright future as the German company sought a regional manufacturing base. Top Government officials, apparently instigated by Proton top brass, baulked at the last minute although Khazanah Nasional was all for the deal.

    Eventually, Proton moved back into private hands, the same owners yet again, DRB-Hicom, but with new major shareholders at this company to which Khazanah Nasional had sold its stake.

    That’s a very brief history of the Malaysian automotive industry. Point to note is that 27 years after the first national car rolled off the production line, cars in Malaysia continue to be among the most expensive in the world and the so-called national manufacturers continue to be heavily protected.

    The NAP has to clearly recognise that the national car industry is not going to survive unless the players have access to technology and have scale. Proton is going to have a problem because it has no permanent tie-up in terms of equity and management with a technology provider.

    In that respect, Perodua is better off because it has both an equity and technology tie-up with Daihatsu, one of the world’s leading manufacturers of small cars. There are also possibilities for Daihatsu using Perodua as its regional manufacturing base which will go a long way towards preserving its future.

    But no such prospect seems to be in store for Proton. It lost a golden opportunity with Volkswagen, one of the largest manufacturers in the world and Europe’s largest, which makes an array of high quality vehicles in all the product groups.

    What is important now, and this is what the NAP should do, is liberalise the industry for the market which accounts for over 90% of sales in Malaysia, below 1800cc category.

    Not only that, it should announce a phased withdrawal of import duties and excise tax say over five years so that there is no tax on cars. If a value-added tax is imposed, then that can apply to cars. This will make the industry wide open to competition and will force consolidation and tie-ups – either compete or perish.

    The import duties were imposed to protect the national cars and the Government can’t say it provides a lot of revenue for it now. If it wants to roll back subsidies it must also roll back unfair taxes, which affect the general public.

    After all, the car is the largest investment most people make after a house and Malaysians have high per capita ownership of cars, given the poor public transport. Removing taxes on cars will benefit a wide cross section of people and give them more disposable income that they can spend on other things, improve their quality of life, and provide a fillip to the economy.

    We made a mistake 27 years ago when we went into car manufacturing. We had neither a comparative advantage nor technological capability. The only way we could have survived was a tie-up, which is why Perodua is successful while Proton is not now, although it initially was.

    The Koreans, who entered the car industry about the same time, are far ahead of us now but that would also be because they were technologically much more prepared and able than us and have a much bigger local market.

    But whatever the arguments, we must accept the national car project was not a complete success and it came at a great cost to the Malaysian public who would have paid many, many billions of ringgit more for the cars that they bought over the last 27 years than was necessary.

    It is simply too much to expect them to continue paying much more for cars for an indefinite period of time.

    ·Independent consultant and writer P Gunasegaram (t.p.guna @gmail. com) still laments that there is no Volkwagen Golf GTI at not much more than RM120,000 which is about what it sells for in Germany.

    Comment by Teddy Gumbang — July 26, 2012 @ 10:13 AM | Reply


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