D-Day for motor sector

BY PAULINE S.C. NG

IT'S D-Day for the motor sector. The government is expected to announce today policy guidelines that will put an end to the months of speculation on what is in store for the sector. 

After earlier promising that details would be out by year-end – in time for the country's auto sector commitment under the Asean Free Trade Area beginning tomorrow – the government has chosen to make the announcement on the last day possible.  

Malaysia Automotive Association president Aishah Ahmad said the long-awaited guidelines would enable carmakers to plan ahead, and provide greater certainty to the industry so it could expand further. 

She does not expect anything too drastic in the announcement. 

Car prices are unlikely to be driven too much lower, given the Government's stated intention of substituting import duties on foreign makes with excise duties to off-set revenues lost, she said. 

Malaysian Automotive Association president Aishah Ahmad

Moreover, with the exception of Perusahaan Otomobil Nasional Bhd (Proton), automakers had pretty much done what they could to reduce car prices, she maintained, noting factors such as the lifting of price controls; and better sourcing for parts, which had already resulted in lower car prices.  

Also, the increasing number of players in the industry has led to keener competition. 

“However,” Aishah added, “the ringgit has weakened against the yen and euro, giving us less room to manoeuvre in terms of exchange rates – unless the Government provides more attractive duties in its announcement.”  

For Proton, 2003 was a fairly dismal year, its sales taking a beating as foreign car makes made further inroads into Malaysia – Asean's biggest car market. 

But the national car marque should play catch-up in 2004, according to Frost & Sullivan research analyst Annuar Jalaluddin.  

Annuar is projecting sales to grow 5%-10% next year, despite the significant drop this year as car buyers put purchasing plans on hold while awaiting further details on the excise duties.  

As at end-November, total industry volume was down to 374,272 units, compared with 407,234 units for the corresponding period last year. 

A more generous tariff announcement could mean even greater growth for the sector next year. 

In any event, Annuar believes Proton will account for much of the growth; its long overdue launch of new models next year – and expected at reduced prices, too – will boost its flagging image and sales.  

In view of the intense competition in the 1,500 cc to 1,800 cc segment, the national carmaker is also likely to make a play in the 1,300cc and below segment. 

Industry observers expect the tariffs to be levied according to engine size. Under Afta rules, tariffs should not exceed 20%. Passenger cars of 1,600cc and below would likely attract a 10%-15% duty, Annuar said, with bigger engine cars enjoying less reduction. 

Imported cars that do not meet the minimum 40% local content requirement would not be entitled to Afta's lower tariffs.  

Thus, nearly every car manufacturer has rushed – or is rushing – to set up assembly plants in an Asean country (mainly Thailand, thus far), leading to expectations that many more car marques – besides first movers Toyota, Honda, and General Motors – would soon have Asean-made models on the roads.