Posted on 13 Nov 2015
International Trade and Industry Minister II Datuk Seri Ong Ka Chuan is optimistic that cars will be cheaper in the next 26 months due to the fact that various trade agreements, including the Asean Economic Community and the Asean Free Trade Agreement with Japan and Australia, would bring out the competitiveness of the industry players.
“All of these (car price reductions), are facilitated in the open market policy. The whole world will explore the free trade areas with three basic principles – movement of goods and services, skilled labour and investment – which will offer competitiveness and they will reduce the car prices definitely,” Ong said after officiating at the Asean Autoshow 2015 at Mines International Exhibition Convention Centre yesterday.
Asked about the gradual TPPA effect that will lift the cap on vehicle imports from the US, he said the market mechanism would adjust accordingly, which would spur competitiveness.
“Under the TPPA, cars from America and Canada will come in for 12 years to enjoy the free tax. You cannot leave immediately. We have to participate in this trend to compete in the international market.
“At least for a while, we will protect the local industry, but after 12 years, you will have a choice of international cars and you cannot stop people coming in,” Ong added.
Malaysia Automotive Institute CEO Mohamed Madani Sahari believes there will be cheaper cars down the road beginning next year as the car price rationalisation exercise has been in progress since 2014.
“By 2018, we estimate a 20% to 22% price reduction. As at May this year, car prices have been reduced, on average, by 16.5%. How did we measure this? We monitor the prices model by model, variant by variant and we do not include promotional prices. We only include the reduction of car prices on a permanent basis,” he said.
However, Malaysia Automotive Association (MAA) president Datuk Aishah Ahmad begs to differ.
“We expect car prices will go up in 2016 due to the foreign exchange factor,” she said.
With the weakening of the ringgit, auto players are caught between a rock and a hard place. On one hand, they have to keep prices low to maintain sales momentum but on the other the rising cost of imported components makes it a difficult task.
UMW Toyota Motor Sdn Bhd, the distributor of Toyota vehicles in Malaysia, was the first to announce that it will be increasing the prices of its cars by 4% to 16% across the range, effective January 2016.
Honda Malaysia has confirmed a 2%-3% price increase will kick in next year, and Mitsubishi Motors Malaysia has said it will raise prices for all its models in the the first quarter of 2016.
However, Aishah reckons that the TPPA is a matter that is still uncertain.
“The TPPA is still in the future and we need to know the details. For the local industry we have not been officially briefed. Import duty will be reduced for most of the companies in Malaysia but we are not sourcing from North America as we only source from Asean, Japan, Korea and European markets,” said Aishah.
Despite the currency crunch and low consumer sentiment due to the Goods and Services Tax, MAA is positive that the TIV for 2015 will hit 670,000 units.
When asked why the MAA’s forecast remains unchanged despite the reduced sales figures in the last few months, Aishah said: “This is due to attractive loan packages lately and October sales have increased (from previous months) with car buyers quick to grab the new models since the dealers have indicated that next year’s prices will be higher.”
