Govt may include ELV under new automotive policy

Project would be led by MARii while the MoT would be working on the vehicle deregistration


The government may include the end-of-life vehicle (ELV) mechanism under the next automotive policy or Malaysia Automotive Policy (MAP).

According to a source close to the development, despite the Ministry of Transport’s (MoT) decision to shelve ELV implementation in June last year, the government is still studying the policy and its viability in Malaysia.

“Last November, some of the MoT staff were sent to Kanazawa, Japan, to explore the ELV policy. They also visited an auto recycling factory to understand the processes of scrapping a vehicle.

“It may be part of the consideration in the next automotive policy — MAP,” the source told The Malaysian Reserve (TMR).

The source also said the project would be led by the Malaysia Automotive Institute (MAI), which has been rebranded as the Malaysia Automotive Robotics and IoT Institute (MARii), while the MoT would be working on the vehicle deregistration.

“It may not be implemented as soon as possible, but it should be included in the next automotive policy’s roadmap,” the source added.

In Japan, about five million cars are disposed of every year, of which 1.3 million were exported as secondhand vehicles. The remaining 3.7 million were dismantled.

The previous National Automotive Policy (NAP2018) launched in April by the Barisan Nasional administration did not address the ELV policy. NAP2018 was aimed at supporting the transformation of the automotive industry towards future mobility.

As such, industry observer Datuk Armin Baniaz Pahamin believes that it is timely for the government to introduce ELV not only for the local industry’s growth, but also for the benefit of users.

“For the automotive industry to prosper, the ELV has to be introduced. We have reached an almost stagnant growth in tandem with our population and the vehicle ratio per household.

“Better roadworthy vehicles would reduce fatalities and provide better safety on the road,” he told TMR recently.

Armin Baniaz also said the ELV policy could reduce car prices.

“In the long run, with a healthy room for new car sales from the scrapping of older cars, the car price will be naturally adjusted downwards,” he said, adding that the government could also reduce the number of abandoned vehicles by the roadside via the ELV policy and by providing incentives for car-scrapping.

Prior to this, former International Trade and Industry Minister Datuk Seri Mustapa Mohamed said despite the industry’s support on ELV, the government had to retract the idea of implementing it due to public dissatisfaction.

ELV was initially announced during the launch of the first NAP in 2006. Under the NAP then, there were 2.7 million passenger vehicles aged 10 years or older recorded in that year. The high number of old vehicles had driven the government to introduce the ELV policy.

In 2009, the government also mooted the idea to introduce mandatory annual inspections as a requirement for road tax renewal for all vehicles exceeding 15 years old.

In the same year, Proton also introduced an allowance payment for buyers who trade in their old cars for a new purchase.

Dubbed as the Proton Xchange programme, the carmaker offered a cash rebate of RM5,000 for cars aged more than 10 years old in exchange for a new Proton Saga or Persona. However, the programme was discontinued in December 2009.

The carmaker said it had received a total of 25,862 applications from March 10 to Oct 31 for the programme.

The ELV policy then resurfaced in 2015 in another form, which was known as the Cash for Clunkers scrappage scheme, led by MAI.

Similar to the Proton’s mechanism, the scheme allowed owners of vehicles aged 10 years or above to obtain a rebate of up to RM5,000 when they traded in their vehicles for a new one from any local original equipment manufacturer (OEM) producer.

The programme was also cancelled, with Mustapa saying that the public was not ready for it.

According to Maybank Investment Bank Research (Maybank IB) in 2017, it was estimated that about a quarter of the 13.3 million private passenger cars on the road were more than 10 years of age.

The bank believed that the full enforcement of ELV for both passenger and commercial vehicles could boost the total industry volume (TIV), as well as total industry production (TIP), in the immediate three to five years.

The report also said that the implementation could ensure the long-term sustainability in auto demand and, most importantly, road safety.

Armin Baniaz suggested that the government tie-up with OEMs for a minimum scrapping price as a trade in or overtrade discount for the buyers to buy new cars, as per what was done in 2009.

“ELV needs to be introduced with a tax incentive or carry-forward tax. It means that a car owner is entitled to a one-time tax exemption that can be carried forward for the purchase of a new vehicle, if the old vehicle is scrapped.

“Rural folks should also adhere to the same rule if we are heading towards an industrialised country,” he said.

However, Armin Baniaz said the government should introduce a tax relief and a special insurance premium to encourage and educate the public on the need to have their car scrapped or inspected.

“The issues with them are affordability and additional expenses to scrap old cars, buy a new one and to have the car inspected and repaired,” he said.

As such, Armin Baniaz opined that vehicles of more than 10 years that passed voluntary inspection should be incentivised with a reduction in their motor insurance premium, as per what is being practised in the UK.

“Road tax renewal is only allowed if the vehicle passed the roadworthiness test and environment pollution emission,” he added.