Malaysia: Car Prices

Are car prices going to decrease? Nope.

According to recent statement by Deputy International Trade and Industry Minister Hamim Samuri:

1. ...Reducing excise duty does not guarantee cheaper cars because manufacturers ultimately have the final say on prices by taking into account various factors.
2. ...the government did not intend to reduce excise duty now because car manufacturers would have to consider the market demand, cost of production, mode of production and country of production before arriving at the price.
3. ...excise duty generates RM7 billion in revenue for the government every year. 
4. ...the government might consider reducing excise duty in the long run.
5. ...the government had no plans to reduce car prices now because it would hurt the industry as well as vehicle owners whose installment repayment period were longer than nine years. 
6. ...excise duty ranged between 65% and 120% and by using locally-made spare parts, the cars will be entitled to excise duty discounts, which in turn will lower prices

I fail to comprehend the reason given, especially the part about reducing excise duties won't make cars cheaper. Excise duty is between 65% and 120%. Even a marginal decrease will have an impact.

You know, it's sad that these politicians have to create stories and excuses just to avoid saying the truth. Everybody knows the reason behind their reluctance to lower car prices. Among the myriad of reasons, but the main one is this:

The bane of Malaysia's automotive industry

Proton & it's vendors

As long as Proton is around, prices will not only remain high, it will increase. This is the reason why the minister says that reducing excise duties will not reduce car prices. The other brands are NOT ALLOWED to sell their cars cheaper. All the arguments about Proton's competitiveness, APs, excise duties, etc. is a waste of time. Proton is an entity to enrich the vendors. That's the main objective for Proton's existence. Nothing to do with national pride, Malaysian car, patriotism, etc. That is why, after decades, Proton still needs protection. It was never the objective for Proton to export globally. Because they know they can't. The best they can do is re-badging or buy technology. Latest rumours is the collaboration with Honda.

While the government says it need to cut subsidies on essential items like petrol, it continues to subsidise companies like Proton.

We don't even have to go into the APs issue. It's already been debated and discussed for umpteen years. Even if we abolish APs, car prices will still be high.

Excise Duties

It has been reported that excise duties rake in about 5-7 billion every year for the government. In today's context, it is not a lot, really. Of course it is no loose change either. So, how do we make up the difference?

Simple. For every percentage lowered for lower segments, implement a proportional percentage increase to luxury brands. Brands such as BMW, VW, Audi, Mercedes, Porche, etc.

At the same time, APs should be made available for tender to the public, instead of given to a few people. Now, these APs are sold by individuals for tens of thousands instead of going to the government.

The rich can afford it. 100k is a lot to the average wage earning person. Whereas 240k is nothing for the rich. Looking at the high number of luxury cars on the roads, I think there is still room to increase prices for these brands.

So, with just these 2 simple steps, the government do not need to lose any revenue.

Price starts from RM240k+ only

Car Financing

Currently loan tenure is up to 9 years. Most cheaper cars don't even last that long.  Because of the high car prices, consumers end up paying more interests, a portion for the excise duties. In other words, consumers take up loan for the excise duty as well. It is quite substantial. Imagine, for a 100k car, 50k is the car price, 50k is excise duty. You are actually paying interest on the 50k borrowed to finance the excise duty.

If Bank Negara cuts the max loan tenure back to 5 years, I can guarantee car sales will drop like a rock. Which brand will suffer most? Proton. Actually the 9-year loans were a life-saver for Proton, inconjunction with the 0% downpayment scheme. If anyone can remember, there was a time about 10 years ago when Proton's sales nose dived and stocks accumulated.

Just ask yourselves, who really benefits from having Proton?

- Consumers? Nope. Given a choice, nobody would want to buy it.
- Government? Nope. It actually costs the government money to keep it afloat.
- Country? Nope. It doesn't bring any prestige nor pride to the nation.
- Employees? Nope. Without Proton, "Detroit of the East" would have been Malaysia, and they could have easily been absorbed into other companies.

By now, we should realise the real reason for high car prices in Malaysia, right? The right question is, who makes money from Proton. Who are they? Nobody knows, because everyone is busy chasing shadows.