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Why NAP 2014 'won't bring down car prices'

MalaysiakiniMalaysiakini – Jan 21, 2014

The National Automotive Policy 2014-2020, which took effect yesterday, is unlikely to bring down car prices as it ignores fundamental reasons for currently high prices, according to PKR.

These include excise duties of up to 110 percent on imported cars, the opaque system of issuing Approved Permits (AP) for car imports and the discretionary tax incentive framework, said strategy director Rafizi Ramli.
As such, he described the NAP as an attempt to "buy time" while continuing the BN's habit of "not fulfilling promises made".
Excise tax breaks for smaller, energy-efficient complete knocked-down models assembled in Malaysia only involve a portion of the market, he noted.

"Without across-the-board excise tax cuts for the entire industry, these isolated measures will only apply to certain vehicles and is no more than a gimmick to sooth the rakyat's anger," he said.
The AP system, he said, "enriches certain cronies" while the discretionary tax incentives - depending on levels of investment - "hides the cost structure of the automotive industry".
"(This) makes room for profit margin manipulation in the manufacture and sales of cars," he said.

Rafizi also slammed the government for "attempting to fool the people" by saying that car prices have gone down by comparing the prices of older models on which manufacturers have already recouped investments.
"Differences in car prices between old models and current models is not a permanent across-the- board price reduction.

"In fact, some models which were introduced at discounts were older models for which development costs have been recouped by car manufacturers, allowing these to be sold at lower prices."
'Why study AP system only now?'

He also frowned on the government's decision to only commission a study on the effects of discontinuation of APs after the Chinese New Year. This is despite having set a deadline of December 2015 for the discontinuation.
"This is no more than an excuse to allow certain quarters close to the BN to get easy profits by burdening the people with high car prices," Rafizi said.

"(International Trade and Industry Minister) Mustapa Mohamad (right) should have studied the matter thoroughly before including the promise of reducing car prices in the BN's 13th general election manifesto."
Yesterday, Mustapa had launched the NAP 2014-2020 which focuses on making Malaysia an energy-efficient vehicle hub.
It does so by providing manufacturing licences to all automakers around the world who can produce energy-efficient cars, regardless of equity and investment level.

The NAP also provides for customised incentives for foreign investors and manufacturers, which could include reduction in excise duties proportional to investment made.

However, Mustapa said the government cannot afford to review excise duties across the board as there is a budget deficit and, at RM7.3 billion last year, excise duties are a major source of revenue.
He also said that, while the December 2015 deadline on APs remains pending the outcome of the study, the government needs to re-examine the situation as "it is more complicated" than initially envisioned.
Mustapa added that the reduction in car prices for selected models last year had benefitted half of the new car buyers as this involved popular models.

Pakatan Rakyat, prior to GE13, had proposed gradually cutting excise duties across the board with the goal of abolishing the duties completely.
To allay the lost of revenue, it proposed temporarily auctioning off APs, before also abolishing the AP system.



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