Could new import regulations steer consumers back towards Malaysian cars?

MAA president says import brands are now more localised compared to the earlier days

By RAHIMI YUNUS / Pic By TMR

Stricter regulations that are proposed to be enforced on the import of vehicles might not be the driving force strong enough to steer consumers towards Malaysian cars.

JF Apex Securities Bhd analyst Nursuhaiza Hashim said the recent proposal that was mooted by Prime Minister Tun Dr Mahathir Mohamad in Parliament earlier this week would not change general perception that imported cars are better than locally manufactured vehicles.

“Purchasing power is still in the consumers’ hands. I don’t think there will be much difference as consumers prefer imported cars and they will still go for it,” she told The Malaysian Reserve (TMR).

She said while the plan might benefit local manufacturers, it will make the automotive sector less competitive, a similar concern that was voiced by Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad who also described the proposal as “a regressive move”.

Aishah said the new policies and restrictions are against the spirit of automotive market liberalisation that is supposed to promote conducive growth via a level playing field among auto players.

Additionally, Aishah said import brands are now more localised compared to the earlier days, citing Honda Malaysia Sdn Bhd as an example which uses between 70% and 80% locally-made components.

During a session in Parliament last Monday, Dr Mahathir said the government is exploring tighter regulations for imported cars to enter the local market as Putrajaya is reviewing the National Automotive Policy.

“Our country allows any imports of foreign (car) brands, but when we want to export our cars, there are many criteria that we need to fulfil, like the Euro 5 standard in Europe, and some even make us subject to their agriculture tax.

“This government will help Proton Holdings Bhd and the industry,” he said, responding to a question from MP Fong Kui Lun (Pakatan Harapan-Bukit Bintang).

On the other hand, TA Securities Holdings Bhd analyst Abel Goon said the outlook of national cars would be better if the government removes the energy-efficient vehicle incentives and increases excise duties on the imports.

“Non-national cars will be more expensive, while national cars become more affordable. People will tend towards buying national cars,” Goon told TMR.

Currently, Honda is the highest selling non-national car by market share, wedging between Malaysian-made Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and Proton.

Affin Hwang Investment Bank Bhd in its research note stated that the automotive dynamics will change altogether if the curb on foreign car imports materialised.

It said Proton (DRB-Hicom Bhd) and Perodua (UMW Holdings Bhd and MBM Resources Bhd) will benefit from this restriction at the expense of foreign car brands like BMW (Sime Darby Bhd), Mazda (Bermaz Auto Bhd), Mercedez-Benz (Cycle & Carriage Bintang Bhd and Hap Seng Consolidated Bhd) and Nissan (Tan Chong Motor Holdings Bhd).

Affin Hwang added that local auto parts makers like APM Automotive Holdings Bhd and MBM Resources would indirectly benefit from the higher local car production.

To reignite the people’s interest in Malaysian cars, Dr Mahathir had also proposed to develop a second national car and it could be purely electric-vehicle (EV) models, an idea that could be more attractive to many Malaysians.

A recent TMR report revealed that Malaysian Green Technology Corp (GreenTech Malaysia) is currently leading a working paper on a potential EV industry proposal.

“The committee is working on a proposal to be presented at the ministry level and if it secures approval, it will then be forwarded to Dr Mahathir,” GreenTech Malaysia CEO Dr Mohd Azman Zainul Abidin said to TMR recently.

As part of the National Electric Mobility Blueprint, Malaysia is expected to become the marketing hub for EVs by 2030.

The blueprint is also aimed at making Malaysia the marketing hub for EVs, with a target of 100,000 electric cars, 125,000 charging stations, 2,000 buses and 100,000 motorcycles on the road by 2030, and indirectly could reduce carbon dioxide emission in the transportation sector.

Meanwhile, Institute for Democracy and Economic Affairs economist Adli Amirullah said the future of the automotive policy still remains uncertain, and that the government should be clear about its plans for the automotive policy.

“Technical standards on imports to ensure passenger safety are welcome, but other barriers to trade, including taxes and duties designed to protect Malaysia’s domestic industry, should be avoided,” he said.

Adli also challenged the claim that Malaysia’s car industry is at an “infant” stage.

“Proton and Perodua have been in the market for at least 33 years and 24 years respectively,” he added.

He said Perodua has grown so much that now it has the highest market share at 39.8% for passenger vehicles and sold a total of 204,887 units in 2017 alone, which surpasses all imported cars.

Proton came third after Honda, with a 13.8% of market share for passenger vehicles and 70,991 units sold in 2017.

“These facts prove that there are flaws in an infant-industry argument. How long should our automotive industry be considered as an ‘infant’?” Adli added.

As for now, in relation to Dr Mahathir’s proposal, Road Transport Department director of automotive engineering division Datuk Mohamad Dalib said the agency has yet to receive any information or directives from the Ministry of International Trade and Industry on any new technical curbs regarding imported cars.

(The article has been edited for correctness and clarity based on the feedback from related stakeholders.)