Our National Automotive Policy that was launched earlier in the year was a bit of a rush job – but they’ve been given a chance to do it over.
Thanks to some pretty large political shifts in our country earlier this year, a number of policies suffered as collateral damage – and of course, one of the most important to us is the National Automotive Policy. This particular guideline has been the boon or bane for many an automaker’s existence and operations in Malaysia over different points in time.
The problem with our NAP is that it changes so rapidly that there can be no longevity or assurance for automakers in order to get them to invest in our country – whether that’s in terms of networks and setting up a local brand presence, to as intensive as manufacturing and assembly. Many, many, many companies in the past have simply taken a look at our intensely volatile guidelines and decided to piss off to Thailand, Indonesia, or the Philippines – literally anywhere else in ASEAN that would give them a solid, persistent answer.
In any case, there’s new stirring that there will be some revisions to the NAP 2020 to accommodate, well, the fact that COVID-19 has thrown a massive monkey wrench in the works. With massive declines in overall sales and TIV, the government decided to reopen most economic sectors through May, and we have started to see a recovery though not quite at the rate that would see us hitting our previous targets for 2020.
As a temporary measure, the government also announced the exemption of sales tax on vehicles – 100% on CKD models and 50% on CBU models, until the end of the year. There is expected to be a surge in sales that usually follows a slump, as is the case with every decision to change our taxation policies that sees people waiting it out, but there can always be more that the government can do to help get the industry up to speed again.
While we could easily say that abolishing import duties and taxes as a whole should be the direction to take, we also know that this is an unrealistic want. The Malaysian government collects a massive amount of money from the sales of vehicles, and removing that source of income would have a huge impact and see taxation ramped up in other sectors. But what we do want to see, as does the majority of automakers here, is more transparency and a proper guideline when it comes to duties and taxation.
The reality is that while we are no longer seeing Proton and Perodua enjoying favourable duty and taxation rates on their vehicles and components, they do benefit from a provision known as the ILP, or Industrial Linkage Program. The ILP takes into account local investments by an automaker, everything from factories to manufacturing plants to RnD, and in turn an automaker will get additional incentives that help to bring the prices of their vehicles down.
The problem with this system is that the actual value of the incentive package is provided on a case by case basis, with very little transparency and in turn making it nearly impossible for some automakers to know what they need to do. It’s like trying to sit for an exam with an unknown syllabus – you can’t possibly expect to perform well.
In addition to that, the government seems to be preoccupied with the starting of a third national car project, which is something that many experts have deemed unnecessary. If that’s the way they want to become a regional automotive leader, it definitely isn’t one that’s going to be easy or quick given the sheer amount of time it takes to even produce something that can be exported. If the goal is to push for being strong regionally, then it all comes down to incentivizing production for exports and helping our existing local brands expand production and develop demand in other markets.
What we truly want to see is a properly thought out road map that will benefit both the major industry players that have helped to grow our local automotive industry, as well as consumers who will be purchasing the vehicles and having to own and run them. There needs to be more focus on our electric vehicle charging infrastructure to prepare for an onslaught of EVs and PHEVs, there needs to be serious development when it comes to automotive vocational programs, and above all there needs to be better transparency with duties and incentives so that we can retain and expand foreign investments in our automotive sector.