NAP must please all in the automotive ecosystem, says CarBengkel CEO

For the upcoming revision of the NAP, vendors and dealers are asked to submit proposals to the govt by this month with elements that could improve the system

By AFIQ AZIZ / Pic By HUSSEIN SHAHAUDDIN

The National Automotive Policy (NAP) 2018, which is expected to be introduced in June, could be an avenue to appease the industry’s ecosystem with a fair distribution of benefits for suppliers, manufacturers and consumers.

In an interview with The Malaysian Reserve, industry observer Datuk Armin Baniaz Pahamin said the NAP must also address all the issues that are affecting players in the industry.

Armin Baniaz, who is also CarBengkel CEO, said each faction in the industry currently has different opinions on the future of the automotive industry and its growth in the coming years.

Each segment also demands different needs to remain competitive and as such, he said the NAP, which was initiated in 2005, should be more inclusive and not just a one-sided policy that only benefits certain quarters.

Armin Barniaz claimed that the policy has been perceived as incentives instrument for manufacturing companies while not offering significant impact towards the last end of the automotive cycle — the retailers and the consumers.

For the upcoming revision of the NAP, vendors and dealers has been requested to submit their proposals to the government by this month with elements that could improve the system.

For example, Armin Barniaz said that the consumers should also have a say in their choice of after-sales services so that the service providers each could have a bigger slice of the market.

The Way It Was

Armin Baniaz, who was also a Proton dealer for more than 20 years, shared some visions of the previous automotive policy, namely the National Car Project 1983.

“When it was first mooted, the automotive — together with other major industry such as the construction sector — carried the responsibility to help the government achieve the 2020 vision for Malaysia to be a developed nation.

“We were supposed to have 8% annual growth of the gross domestic product (GDP) and the automotive was one of the key pillars in supporting that growth,” he said.

After revisions of the NAP, he said that it is still unclear where the automotive policy is heading.

Between 2016 and 2017, the sector recorded a 4% GDP growth with 499,639 total production volumes and 576,635 vehicles sold last year.

Liberalise Warranty

Armin Baniaz suggested that it is time for the government to consider liberalising warranty for new vehicles and allow car owners to leverage on all workshops around Malaysia instead of having no choice, but to go to designated centres for services, maintenance and repair.

As at last year, there were about 53,000 workshops in the country with 30,000 of them registered with the Domestic Trade, Cooperatives and Consumerism Ministry (KPDNKK).

Of the total, only about 500 centres belong to the original equipment manufacturer (OEM) authorised service centre.

Armin Baniaz said the liberalisation will permit 590,000 new car owners to choose their preferable workshop in maintaining, servicing, repairing and inspecting their cars annually without revoking the original warranty.

“It is more convenient for the owner to maintain the vehicle at any preferable workshops in terms of location and perhaps price, as well as helping them reduce the cost of car ownership,” he said.

He said the proposal will complement KPDNKK’s motion in accrediting independent workshops operation under the Automotive Maintenance and Repair Service Bill, which was supposed to be tabled in the Parliament last month.

The bill enforcement is expected to raise the level of professionalism among mechanics, on par with other career fields.

It was not tabled as the Parliament session was adjourned and dissolved to make way for the 14th General Election.

While the ministry is working on the licensing plan, Malaysia Automotive Institute has also up-scaled more than 2,400 independent workshops under its Workshop Transformation Programme that started in 2014.

Armin Baniaz said there will be more well-trained mechanics with the ability to provide better quality service — as good as the OEM service centres.

At present, one OEM service centre could cater to about 1,200 vehicles annually and the monopoly is deemed anti-competitive to the more than 40,000 independent workshops.

He added that authorities in other countries, such as Singapore have already stepped in to mitigate the monopoly in their respective automotive retailing sectors.

As a result, the supply of original parts has been made open to all workshops.

“Now they are competing based on the quality of services, with an equal playing field among the auto’s after- sales industry,” he said.

Competition Commission of Singapore last year announced that 90% of dealers in the country had agreed to void the warranty restriction which had crimped independent workshops’ ability to compete effectively.

Among the distributors nodded to the policy included Mercedes-Benz, Mitsubishi, Toyota, Porsche and BMW brands dealer. Volkswagen Group and Premium Automobiles, which deals Audi cars, never placed such warranty restriction in the country.

In Malaysia, most OEMs provide up to five years of warranty and certain maximum mileage in the sales agreement, with a condition that the vehicle must not be serviced by other than the OEM authorised workshop centres, during the period.

Armin Baniaz said the government must also consider enforcing the supply of original parts to be channelled to the independent workshops.

He said besides consumers, the vendors can also benefit when they sell their parts to all 50,000 work- shops directly instead of the only 500 outlets.

Establish an Accredited Body

Datuk Armin Baniaz Pahamin

Over the years, Armin Baniaz says that the growth of the auto industry has been heavily dependent on the FIs’ appetite (Pic: TMRpic)

Armin Baniaz said car owners are also suffering from the rapid depreciation of the second-hand car value, which is not parallel with their loan entitlement.

Currently, consumers can lose about 20% of their purchasing price the moment a vehicle is driven out of the showroom after its purchase.

“Consumers have to wait at least for five years before they can sell or trade in their car without having to pay the bank for balance loan, due to low valuation of second-hand car by the bank.

“On average, it is only after five years that car owner is able to dispose of the car without paying the bank for the balance loan,” he said.

“If they want to sell or trade in the vehicle within the loan period, they will have to pay the extra remaining loan to the bank. Owners would have to keep the car until up to nine years to avoid such situation,” said Armin Baniaz.

As a result consumers will be keeping their old vehicles, which have a very low roadworthiness and durability. It also directly affects the sales of new cars which would impede the industry’s growth.

“Consumers are stuck with their loans which are higher than the asset value. On top of that, they have to stick to their warranties and be serviced by OEM workshops,” he Armin Baniaz said.

He suggested the government to establish an accredited entity to monitor and determine the second-hand car value, so it will be in tandem with the financing period granted by the banks.

Register and Licensed Automotive Salesman

Armin Baniaz, who was also the Proton Edar Dealer Association president for 20 years, said the automotive retailing sector too has not been significantly addressed in the policy.

“One of the biggest hassles among us is the brokering activity. While dealers are putting money employing salesman to make sales, they can easily sell cars from another outlet and gain a better commission,” he said, adding that the problem will be worse as the market faces any downturn.

He said with the implementation, the industry will be having quality salesmen akin to property agents who have better ability in presenting and and selling the products.

“A vehicle is the second-highest household expenditure after property. So, before anyone can sign nine years of debt, they must have the knowledge and understanding of their purchasing agreement and the impact. That is the reason why the professionalism of the salesman must be improved,” he said.

He added that brokering activities will also directly affect OEM and in the long run, jeopardise the overall automotive industry.

Armin Barniaz also suggested that the government revisit the End of Life Vehicle proposal, better known as the scrapped policy which was introduced in the 2009 NAP revision.

The policy was supposed to enforce a mandatory annual inspection of vehicles above 15 years old as an “introduction” step before the full policy could be implemented.

However, the government made a full U-turn within a week after a strong objection by the public.

At that point, some 2.7 million, or 14.5%, passenger vehicles on the road were more than 10 years old.

“To ensure our total industry growth smoothly, there must be room for new vehicles. We need the scrapped policy,” he said.

Lack of Support by FIs

Over the years, Armin Baniaz said the growth of the auto industry has been heavily dependent on the financial institutions’ (FIs) appetite.

He said previously, the government targeted a 600,000 total industry volume, the banks were very supportive to achieve the vision, including sending representatives to OEM branches and dealers.

However, the practice was discontinued, believed to be due to cost-cutting measures among FIs.

“To sustain the auto industry growth — the banks would have to maintain similar directions in tandem with the industry’s target set by the government,” he said.

FIs are reporting to the Ministry of Finance, while automotive sectors fall under Ministry of International Trade and Industry jurisdiction.

“All these, which were not touched in the previous NAP are crucial to be addressed. If not, we might have to wait another four years for the next policy revision,” he added.