In Malaysia, when car prices drop, so do sales
What was supposed to be good news for car buyers in Malaysia, has instead turned out to be a case of bitter irony.Sales of cars in this country have dropped ever since the government announced sizeable reductions in duties of cars assembled in ASEAN, under the new National Automotive Policy (NAP).
The latest to fall victim to this unfortunate phenomenon is Tan Chong Motors, local distributor of Nissan cars, which despite cutting the prices of their cars by as much as 15% have just reported a drop in car sales in the second quarter of 2006 to 5,496 units from 6,705 units a year ago.
And it's not just the distributors/manufacturers that are feeling the pinch. Former poster-boy-bumiputra company and automotive harness wire maker APM Industries Holdings has fallen under receivership due to the failing fortunes of its major customer Proton, as the latter chopped its list of component vendors.
One can only guess how the smaller component vendors are faring in such difficult times.
Timing could not have been worse for the introduction of the NAP. Effectively, a trifecta of issues have emerged to counteract the potential benefits of the reductions in duty: Skyrocketing fuel prices, rising interest rates (and therefore cost of vehicle ownership) and falling used car prices.
While the first two are either finicky or impossible to control, the government can still try to turn things around by introducing a car scrapping policy into this country. Removing old cars from the market should stir demand for new cars.
Our southern neighbours already have such a system in place where car owners are allowed to use their vehicles for a period of 10 years after which they must be sent for yearly inspections to qualify for an annual license. Then, to use their cars for another 10 years they will have to get a new Certificate of Entitlement (COE) at the prevailing price.
An additional plus side is that scrapping will help to remove the smoke-belching old jalopies and rusting scrap heaps from our roads.
The major down side of introducing a scrapping policy is the idea that you no longer 'own' your vehicle, but rather you lease it from the government for that particular period. (Not that many of us really own our vehicles now of course since Malaysians are well known for their loooong car loan tenures).
The government will have to think long and hard about introducing such a scheme as it may prove politically suicidal especially if it impacts the rural population (and their votes).
posted by hew @ 10:26 pm
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