KUCHING: The end-of-life vehicle (ELV) policy for national cars in Malaysia should be sufficiently addressed by the government to address vehicle safety and roadworthiness issues.
Perusahaan Otomobil Kedua Sdn Bhd (Perodua) is urging the government to take another look at the ELV policy by proposing that the policy be implemented voluntarily before it is made compulsory.
AmResearch Sdn Bhd (AmResearch) in a research report stated that a relook and potential implementation for ELV was a positive move for the auto sector as it would encourage new car sales, particularly that of Perodua and Proton Holdings Bhd (Proton) which were the most competitively priced vehicles in the market currently.
“To kick-start such as scheme, we believe there should be incentives to encourage owners to scrap their old vehicles and change to a new one,” said the research firm.
It noted that the idea of an ELV policy was not new as it was one of the focus areas in the previous National Automotive Policy (NAP) in late 2009, apart from being heavily lobbied by Proton.
However, the implementation of such a policy faced hurdles as the majority of the lower income group and rural community were using old cars. This would translate into a sudden surge in costs for them to acquire new cars, particularly given very low trade-in value for old cars of more than 10 years.
To recap, in 2009 Perodua and Proton led a pilot ‘scrapping scheme’ project to encourage owners of cars more than 10 years to scrap their existing cars. In return, the car owners received a RM5,000 discount, a fund allocated by the government to buy new Perodua or Proton models.
The research firm gathered that as a result of such a scheme, it raised Perodua sales much higher in 2009 and Proton’s sales rose four per cent, taking into consideration the global financial crisis in that year and the auto sector’s two per cent sales contraction.
“We also believe uncertainties over charges in duty policies (in particular excise duties) may slightly dampen auto sales in the near term. Consumers are likely to hold back purchases in anticipation of cheaper car prices, similar to the situation when the government was in the midst of making a decision to reduce import duties to comply with Asean Free Trade Agreement requirements,” added the analyst.
Eventually, excise duties were raised to compensate for the reduced import duties and car prices hardly changed.
AmResearch suggested that any duty reduction of around five per cent to 10 per cent over several years would be gradual to avoid excessive impact on banks and existing vehicle users as this move should cushion any excessive impact on car sales.
In that regard, the research house opined that the corresponding decrease in government income would have to be offset elsewhere, probably reduction in fuel subsidies or increase in sales tax.