Car prices should be cut — slowly, says auto industry
KUALA LUMPUR, Aug 28 — Malaysia’s auto industry has given qualified support for cheaper cars by gradually reducing excise duties even as pressure mounts on Putrajaya to lessen the burden of owning a vehicle in one of Southeast Asia’s largest markets.
The Malaysian Automotive Association (MAA) support comes after the federal opposition said that it wanted to lessen the pain Malaysians feel at having to pay some of the highest car prices in the world and would cut prices through a gradual reduction in excise duties which currently run between 65 and 105 per cent.
Putrajaya has also indicated a gradual cut is in the offing, about a month after PKR’s strategy chief Rafizi Ramli first made the promise of lower taxes.
The Star daily has also quoted industry sources as saying that the revised National Automotive Policy (NAP) will address the gradual reduction of car prices in the country, where more than 600,000 vehicles are sold annually to a population of just 28 million people.
MAA president Datuk Aishah Ahmad said lower prices through lower taxes would be welcomed.
“If prices are reduced on a gradual basis and not cause a disruption, then it is good,” said the industry veteran who heads the main association representing the auto industry in the country.
Aishah added however that she did not think prices should be reduced at “one shot” as it could cause car buying to come to a standstill as people wait for prices to fall.
Malaysians are currently taxed at between 65 and 105 per cent in excise duties depending on the engine capacity of the car they buy, forming a lucrative stream of revenue for the government.
This means that if a consumer buys a car for RM100,000, as much as RM55,000 goes to the government as excise duty. This is on top of the 10 per cent sales tax that they have to pay.
Those who buy imported cars also have to pay for approved permits (APs) which are ironically given free to a select group of businessmen. The higher duties also came about after Malaysia began an industrialisation drive in the 1980s with its national carmaker Proton, which is now no longer in government hands.
Many Malaysians however say that they have little choice but to buy cars to get around as they feel they cannot depend on the public transportation system and the high car prices have helped to drive household debt to more than 75 per cent of GDP, the second highest in Asia.
About 20 per cent of the RM581 billion total household debt in the country last year is being held in cars, an asset that depreciates substantially over time until it is close to worthless.
Many Malaysians also take nine-year loans in order to afford a car, a lengthy tenure that is virtually unheard of in other countries where two- to five-year tenures are the norm.
The high excise duties are seen by many economists to be one of the major distortions in the economy and they say a cut could help stimulate the economy by boosting disposable income and reducing the household debt burden.