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The politics of driving car prices down

Mainstream politics in Malaysia has finally come to terms that our country cannot continue to require the rakyat to pay amongst the highest prices for cars in the world.

Since the inception of the national car project in the mid 80s, prices of non-national cars have progressively increased.

For example a Honda Accord in the mid-80s cost less than RM30,000. At that time you could get a Proton Saga for less than RM20,000.

It now costs about RM142,000 for an entry level Accord 2.0 in peninsular Malaysia. A similar car in tax-free Langkawi costs less than RM90,000. That's a whopping RM50,000 or more than 50 percent extra on taxes.

Prices of non-national cars in Malaysia generally costs 50-100 percent more than the prices of similar cars in some western countries.

Initially, such price differentials were meant as a form of protectionism for the national car industry.

Now after more than a quarter century since its inception, it has become a bane to the rakyat, eating more and more into our disposable income.

Presently, excise duties and import duties have become such an important source of revenue for the government that it is very difficult for the government to dismantle this burdensome policy.

In February 2013, Pakatan Rakyat launched its manifesto which included a proposal to restructure the national automotive policy. At page 24-25 of its manifesto, it states:

RESTRUCTURE THE AUTOMOTIVE POLICY TO REDUCE THE PEOPLE'S BURDEN

The ratio of car prices in Malaysia to average household income is one of the highest in the world. The lack of effective public transport facilities gives the people no choice but to buy their own cars.

As a result, car debts are the main financial burden incurred by every household. Every month a large portion of their income goes to servicing their car loan installments.

To reduce the people's burden and increase their disposable income, Pakatan Rakyat will restructure automotive policy as follows:

Abolish Excise Duty

Car excise tax that is currently being levied is at an excessive 70%, resulting in high car prices.

Car excise prices will be lowered in stages with the intention of abolishing it in 5 years' time in order that car prices can be more competitive.

Liberalising the national automotive industry will increase its competitiveness and add value for people.

Pakatan Rakyat believes that a truly competitive automotive industry can produce cars priced as low as RM 25,000.

BN's response

In response, BN in its recently unveiled manifesto had promised to revamp the National Automotive Policy to gradually reduce car prices by 20 percent to 30 percent.

Although lacking in specific details as to how such reductions will be made, nevertheless it must be welcomed and is a recognition that the present policy with regard to car prices in Malaysia cannot remain.

However, without a commitment to lower taxes (i.e. excise duties/ import duties) on cars, it is unlikely that we will see any material reduction on prices of cars.

The government cannot expect to achieve significant reduction by expecting manufacturers and dealers to reduce the selling prices of such cars without corresponding reduction in taxes.

Therefore, regardless of who wins the next general election, I hope the policymakers seriously look into how to reduce car prices in our country to ease the burden of the rakyat as a whole.

The time has come for the rakyat to finally enjoy lower car prices in Malaysia.