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Daim suggests abolishing open Approved Permits for cars

NOVEMBER 20, 2013

Former finance minister Tun Daim Zainuddin has suggested that the government consider abolishing the open Approved Permits (APs) policy required for the import of vehicles to help reduce the cost of owning cars in Malaysia.

“Removing the APs would translate into cheaper cars for the rakyat,” he said here today.

Daim was commenting on a statement by Mercedes-Benz Malaysia Sdn Bhd President and Chief Executive Officer, Roland S. Folger, who had said that such a move would mean cheaper cars and encourage car manufacturers to increase their investments to produce more affordable cars locally.

“For me, there is one way we can reduce car prices. It’s a simple solution to the issue (and that is to) do away with open APs,” Folger told The Sun newspaper recently.

Daim said the government would have to take positive steps in the soon-to-be-revised National Automotive Policy (NAP) in order to consider the interests of larger sections of the population rather than a selected few.

It has been reported that 98 companies are Open AP holders for the import of cars into the country.

Industry analysts have often debated how to make the local automotive industry more competitive, encourage greater investment and re-investment, and for cars to be more affordable locally.

Folger had also highlighted the fact that removing open APs would not hurt government revenue collection but would even serve to enhance its collection.

Industry analysts say that the government could do away with an extra layer of people in the business equation and pass on the cost savings to the rakyat as open AP holders charge several thousand ringgit for each transaction processed.

The cost savings could be used by the government to spur the industry further or chanelled to more productive spending, they add.

Analysts suggested that the government could tender out the Open APs to earn more revenue, which in turn may reduce taxes for car buyers to make the cars more affordable.

Open APs are usually used by parallel importers to import re-conditioned luxury cars to sell them at slightly lower prices than the locally-assembled ones.

For example, an Internet check revealed that a new Mercedes-Benz E200 is sold from about ¡ê35,000 (about RM179,000) in Great Britain compared with RM366,000 for the same locally-assembled model in Malaysia.

A second-hand Mercedes-Benz E200 in Great Britain would be even cheaper by about ¡ê10,000 or about RM51,000, depending on the year of manufacture and mileage covered. 

Grey importers, or open AP holders, then take advantage of the higher price differential in Malaysia to sell the “re-conditioned” E200 from between RM270,000 and RM290,000 each, even after paying for taxes.

This discount is often seen as “advantageous” to the consumer but is at the expense of the manufacturer who has to incur additional costs like local procurement, assembly costs, branding and promotion, sales and after-sales service.

Doing away with open APs would also eliminate Malaysia as one of the top destinations for luxury second-hand cars in the world, the analysts note.

They stress that the government would have to re-examine the whole automotive industry structure, including areas like the tax regime and end-of-lifespan of cars, to ensure that it can move forward since the national car makers have been around for almost 20 to 30 years as the first Proton Saga rolled out in July 1985 and the first Perodua Kancil emerged in August 1994.

The NAP was introduced on March 22, 2006 and subsequently revised in 2009 and 2012 aimed at promoting a competitive and viable domestic automotive sector, in particular, national car manufacturers.

It was also to promote Malaysia as an automotive regional hub, by integrating the local automotive industry into regional and global industry networks within the increasingly liberalised and competitive global environment.

Analysts also say that providing for greater competition would shake out the complacency among local car manufacturers and their local parts suppliers.

They also hope that the revised NAP would look at the larger picture and help rejuvenate the local automotive industry to become a foreign exchange earner for the country.

 - Bernama