Cut car prices to ease rising cost of living
COMMENT: The recent increase in the prices of fuel – RON95 and diesel – sparked a public outcry because the move came at a time when consumers are experiencing financially lean times.
More so, when the public transport system is still not working reliably and punctually. Besides, car owners now have to pay extra at the pump and more to the bank every month, thanks to the comparatively higher retail prices of vehicles in Malaysia.
Not all these people can take the bus or train even if a proper public transport system is in place. They will still rely on their cars.
But cars are not cheap and the automotive industry is not in good shape. The notably higher price tags of imported cars and the lack of attractive and fuel economical models from the local manufacturers have resulted in a lacklustre growth outlook for this industry.
Indeed, the Malaysian Automotive Association (MAA) forecasts the total industry volume (TIV) to see a weak growth of 2.0 per cent across the board (passenger and commercial vehicles) for 2013.
The TIV growth outlook for the following years is only marginally better at 2.1 per cent, 2.2 per cent, 2.3 per cent and 2.4 per cent respectively for the years 2104 to 2017, the MAA said in statement on July 22.
This is amidst an increasingly competitive Asean market ecosystem, with Thailand and Indonesia having established considerably bigger auto industry ecosystems and reporting strong TIV growth.
Making a strong comeback from massive floods, Thailand built 2,483,043 vehicles last year (about four times Malaysia’s output of 627,753), making it the ninth largest producer in the world.
The Thai government’s automotive policy has attracted foreign investors (especially from Japan) and the industry is expected to churn out three million vehicles by 2015, five times Malaysia’s current TIV.
Meanwhile, the latest revision of Malaysia’s National Automotive Policy (NAP) – which was expected to be revealed in Budget 2013 but held back – is still being withheld, even after the 13th general election.
Prospective car buyers in general are holding back their purchases in anticipation of potentially lower prices brought about by (hopefully) favourable guidelines under the yet-to-be-announced NAP revision.
It is believed that the delay is because the cabinet and related government agencies have to be briefed on the finer details of the NAP which contains an entire roadmap of the industry and underlying guidelines.
This administrative delay is unhealthy for the industry as it impedes consumer market forces.
International Trade and Industry Minister Datuk Seri Mustapa Mohamed has stated that car ownership costs in Malaysia are lower than that of other Asean countries when taking into consideration oil and gas subsidies, maintenance cost, insurance and others.
However, this sweeping statement does not take into account the rapidly increasing overall cost of living (of which vehicle ownership cost is just a component), thanks to increasing fuel prices which will most likely keep on rising in the years to come.
Clearly, the rising cost of living and ever-buoyant car prices will certainly spell increased hardship for Malaysians as they watch their disposable income shrink and consequently adopt tighter personal spending budgets.
In financially lean times, most Malaysians will choose to withhold high ticket purchases (such as cars) and save for more crucial items such as houses or apartments which are not getting any cheaper.
Stifled consumerism spells danger for the country’s economy as it looks towards domestic consumption for economic growth and the Goods and Services Tax (GST) for consumption-based income.
The government must bear in mind that GST actually relies on a robust and stable rate of consumption by the people in order to sufficiently contribute to its coffers.
Weakened consumerism will choke this revenue stream and lead the government to even greater difficulties when managing the country’s finances.
Higher fuel prices and the resulting higher cost of living must be countered by lower car prices to save the country’s economy. It is that simple.