Saturday, November 30, 2013

CAR PRICES


As posted by Dr. Mahathir Mohamad at Che Det on November 28, 2013

1. Malaysians are perpetually complaining about car prices being too high in Malaysia. Yet we should know that on a per head basis, there are more cars in Malaysia than all the other Asean countries.

2. Already there are traffic jams all over K.L., many half a kilo long!

3. It takes half an hour to move just one kilometre. If we lower the car prices, more vehicles will be on the road. And of course more and longer traffic jams. The jams also contribute much to pollution in K.L. as the engines run but the cars are going nowhere.

4. Actually the price of cars is high because we want to limit the consumption of fossil fuel. The big-engined luxury models are taxed 300%. Otherwise the rich owners would enjoy the subsidy more than the owners of small cars.

5. I believe these rich people will still buy big cars even if the tax is higher.

6. There was a time when Government protection of Proton was high that it won 80% of market share. Today it has only 26% of the market.

7. If it goes down further we may have to shut down Proton.

8. This will not lower the prices for foreign cars. The Government would still have to recover subsidy cost. But some 150,000 jobs generated by the national car industry will be lost.

9. There will be a big outflow of foreign exchange to purchase imports. We will lose much of our engineering capability which in turn would lead to more job losses as engineering-based industries cannot fund skilled workers. There will be more outflow of funds.

10. Business people do not like to do business with strangers. It is difficult to build trust with a business partner or an agent when you do not know their background. Worse still when you know the stranger has no capital and no experience.

11. It was because of this that Malays and other Bumiputras could not enter the automotive business. No one was willing to appoint them as agents or dealers or take them as partners.

12. When a few Malays imported used cars, the local agents had to be paid overriding commission. Only a very few Malays could do this. This frustrates the implementation of the NEP objective of eliminating the identification of race with economic functions.

13. It was to overcome this that the Government allowed the importation of Japanese reconditioned cars. APs were issued for the aspiring Malay auto dealers.

14. The recond cars were almost as good as new. They were cheaper and they enabled lower income people to own cars. The prices of new, small cars also went down. The big luxury cars kept going up in prices as they were not competing with the small reconditioned cars.

15. Now second hand Japanese cars are no longer imported. The AP system continued for new and second hand special models. The demand is such that auto dealers are prepared to buy the APs at high prices.

16. The way to avoid sale of APs is to issue them only to genuine auto companies.

17. Stopping APs will only flood the market with foreign makes which will be the death knell of national cars. The consequence of this has already been mentioned earlier.

18. APs are issued not only for cars but also for sugar, flour, rice and a variety of other items. Some people have benefitted from this system over the past 80 years. They have become billionaires. There have been no demand to stop these APs. The recipients live a charmed life.

19. If we must reconsider the AP system, it must include all the APs. The effect on our economy and trade balance must be accepted by us all.