End-of-life vehicle policy — is it time?

The reality is, getting rid of anything old on the road is still a tricky task in Malaysia as many old folks in rural areas are not very keen on the implementation of ELV


If a car is as easy to dispose of as tissue paper, we might not have to deal with bone shakers that are camouflaged to pass as taxis and school buses, or even private family vehicles.

There might not be lorries with wooden parts that spew thick black carbon monoxide-laced fumes from rattling exhaust pipes.

There’d be only decent looking, if not gleaming vehicles (preferably energy efficient and environmentally-friendly) gliding along the roads and highways.

The reality is, getting rid of anything old on the road is still a tricky task in Malaysia.

Once in awhile, you might bump into a Datsun 120Y or 510, Daihatsu Charade, Mazda 323 or Ford Laser that could be good reminders of the good old days.

Of course, we still have friends and relatives who drive various earlier Proton models like the Saga, Wira, Iswara and the more sporty Knight.

The number of cars in Malaysia is growing faster than the country’s population.

According to Malaysia Automotive Association (MAA) data, in 1983, only 118,464 vehicles were sold in Malaysia, with about 80% in the passenger car segment.

The growth has been quite steady since. In 1991, the country’s total industry volume (TIV) reached 216,578, 135,479 of which were under the passenger vehicle category.

By 2005, the TIV numbers jumped to 563,510 and Malaysia became one of the countries with a high car ownership ratio in the region — with a ratio of 200 cars for every 1,000 people.

In 2014, market research agency Nielsen revealed that Malaysia had the third-highest rate of car ownership in the world with 93% of households owning a car, only behind the two wealthy principalities Liechtenstein and Monaco.

Following the national car project, the government introduced the National Automotive Policy (NAP) in 2009 and a revised version in 2014.

Both policies were meant to ensure the sustainability of the high technology industry that the country needed.

It is also noteworthy to mention that Malaysia has developed more than 460 parts suppliers with 700 car dealers in the country last year alone, employing some 700,000 people in the automotive industry.

Currently, around 40 original equipment manufacturers (OEMs) exist in the ecosystem.

The TIV numbers had also bloated to 666,674 in 2015 — the highest car sales recorded so far.

However, the Road Transport Department data may vary. The TIV numbers have been declining for two consecutive years to 580,124 in 2016 and 576,635 last year.

Of the total, 90% of the TIV market for both years was dominated by passenger vehicles.

Total vehicle registration also reached 28.2 million in 2017, which translates to a ratio of 0.9 vehicles for every person in the country.

The total TIV sales are expected to reach more than 600,000 units in 2018, especially supported by he three-month tax holiday period that was initiated before the reintroduction of the Sales and Services Tax.

If the trend continues, it is not impossible for Malaysia to reach a car ratio of one person per vehicle by 2019.

The picture is, however, not as perfect. With the number of brand new units, one has to deal with an increasing number of abandoned vehicles.

At the moment, some 60,000 abandoned vehicles are strewn all over the country.

A form of control is definitely needed. Enter Transport Minister Anthony Loke Siew Fook who had come out with a plan to amend the Road Transport Act 1987 that would empower local councils to remove such eyesores within their jurisdiction by next year.

A form of control is definitely needed as Loke has come out with a plan to amend the Road Transport Act 1987 that would empower local councils to remove such eyesores by next year (Pic by Ismail Che Rus/TMR)

The move is expected to uplift the automotive sector onto the next chapter via the re-establishment of the end-of-life vehicle (ELV) policy.

The initiative, while not really being a new idea, has been put on hold many times as the authorities failed to convince Malaysians to scrap their cars.

Industry players, on the other hand, have been urging the government to review the ELV in order to allow more room for market growth as it has reached a saturated point of single- digit growth.

Businesses also said the policy would provide more roadworthy vehicles to the car owners.

Industry observer Datuk Armin Baniaz Pahamin said it is a crucial time for the government to reduce the number of abandoned vehicles with the ELV policy that includes incentives for scrapping.

Armin (centre) says it is a crucial time for the govt to reduce the number of abandoned vehicles with the ELV policy that include incentives for scrapping in order for the automotive industry to prosper (Pic: TMRpic)

“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,” he told The Malaysian Reserve recently.

Armin said roadworthy vehicles would reduce fatalities and ensure better safety on the road.

ELV Policy — Trial and Errors

Under the NAP 2009, the government introduced mandatory annual inspections as a requirement for road tax renewal for all vehicles aged 15 years or older as the first step towards the implementation of a full ELV policy.

During the year, Proton Holdings Bhd also introduced allowance payments for buyers who trade in their old car for new purchases.

Called 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, following public objections, the government made a complete U-turn on the policy.

It is unknown how much Proton’s initiative had achieved. According to Armin, who is also the Proton Edar Dealers Association Malaysia president for 20 years, the programme
had received a positive response from distributors.

The ELV policy resurfaced in 2015 in another form — “Cash for Clunkers” scrappage scheme lead by Malaysia Automotive Institute (MAI).

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

However, again, the plan was curbed. Former International Trade and Industry Minister Datuk Seri Mustapa Mohamed stated that the public was “not ready” for such  a

Based on Maybank Investment Bank Research in 2017, it is estimated that about a quarter of the 13.3 million private passenger cars on the road are more than 10 years of age.

The bank believes that the full force of the ELV policy for both passenger and commercial vehicles could boost TIV, as well as total industry production in the immediate three to five years.

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

Road Safety Versus Industry Growth

There is no doubt that by implementing the ELV, people could drive well-maintained and safer cars, thus reducing the number of road accidents.

A Malaysian Institute of Road Safety Research (Miros) report stated otherwise, saying that the contribution of vehicle errors towards road accidents is not that significant.

Its September 2017 report, called “Private Vehicle Roadworthiness from the Vehicle Inspection Perspective”, stated that only 5% of road accidents in Malaysia contributed to the car roadworthiness issue.

“Many researchers have identified three major factors contributing to road crashes, namely human, vehicle, as well as road and environment.

“Additionally, various studies have revealed that the human, or driver factor, accounts for over 90% of all fatal and injury cases, thus prompting human-related issues to gain traction among the research fraternity.

“On the other hand, unsafe vehicles are likely to be the contributing factor in less than 5% of all traffic-related crashes and have attracted little attention,” the report said.

Currently, inspection of private vehicle roadworthiness in Malaysia has been done on a voluntary basis, as opposed to commercial vehicles (CV) that are mandated to undergo
periodical inspections once every six months.

Miros said while CV routine inspections reached a quarter of a million annually, only about 7,000 units of passenger vehicles were voluntarily inspected per year between 2010 and 2015.

“The result also shows that the passing rate for routine inspections was about 75% each year. Compared to voluntary inspection, the passing rate was rather low, which was approximately 61% each year,” Miros said, adding that the most passenger vehicles involve the brake system.

The report added that over 600,000 private vehicles were involved in road crashes in 2015 — a leap of about 40% from 2006 — which was six times higher compared to CV crash involvements.

Despite the outcome of the report, Loke also postponed the ELV implementation due to public outcry.

Roadworthy in Some ‘Designated’ Town

Meanwhile, many old folks in rural areas are not very keen on the implementation of the ELV. Some claim their cars are still “roadworthy” for short distances, or for domestic purposes.

Adding another five to nine years of loans might not be plausible for them.

A local vendor, who wishes to see the auto market grow continuously, said the government should implement restrictions to these vehicles from entering main roads and

“If we are moving towards becoming a developed country, our people should also be provided with at least safe vehicles, even for those smaller towns,” the vendor said.

Armin also proposed that the government form tie-ups with OEMs to have a minimum scrapping price as a trade-in, or overtrade discount for buyers to purchase new cars, as what had been done in 2009.

“The ELV needs to be introduced with tax incentives or carry forward tax. Car owners should be entitled to a one-time tax exemption that can be carried forward for the purchase of new vehicles if the old vehicle is scrapped,” he said.

Armin also suggests vehicles older than 10 years which pass the voluntary inspections should be incentivised for a reduction in their motor insurance premium, as is practised in the UK.

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

ELV in MAP 2019?

One source close to the issue said despite the Minsitry of Transport’s (MoT) decision to shelve the Cash for Clunkers project in June last year, the study on the ELV is still ongoing.

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

“It may be part of the consideration in the next automotive policy — the Malaysia Automotive Policy (MAP),” the source said.

The source also said the project will be led by MAI — which was rebranded as Malaysia Automotive, Robotics and IoT Institute, while the MoT will work on the vehicle de-registration.

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

In Japan, roughly five million cars are disposed of every year. About 1.3 million units are exported as second- hand vehicles, while the remaining 3.7 million dismantled.

“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,” Armin said.