Car prices may rise in six months time if the global economic trend of lower crude oil prices and the strengthening of the US dollar persists, said the Malaysia Automotive Institute.

"We anticipate that by mid year, if the situation persist, meaning (that) if the (price of) crude oil continues to reduce and the US dollar continues to appreciate, by mid year, if we don't do anything, there will be impact," its chief executive officer M Madani Sahari said.

He said this when asked if car prices will increase, during the ‘Malaysia Automotive Institute Review and Insight 2014/2015' media briefing session.

He added that economic challenges have had an impact to the original equipment manufacturers as well.

"These six months are very important. If the situation improves, we should be able to cope with what had happened in the last six months and go back to normal," he said.

 

According to Madani, the appreciation of US dollar had immediate impact on 30 percent of the materials and supplies for the automotive industry, which trades in that currency based on current foreign exchange rates.

 

He said that there were ongoing discussions on mitigating the immediate impact.

 

Meanwhile, there’s medium impact on the remaining 70 percent of the materials and supplies traded in previous US dollar exchange rates.

 

Thus, a committee had been set up to monitor the situation and recommend necessary action, said Madani.

 

Among the recommendations was to trade material and supplies in other currencies.

 

“I think we need to have more flexibility,” he added.

 

Nevertheless, Madani pointed out that lower crude oil price was benefiting the consumer as it lowered the price of petrol.

 

GST will have minimal effect 

On how the goods and services tax (GST) will affect car prices, Madani said that it was just a perception that GST was detrimental to the total industry volume.

Instead, he said there would be price reductions and the six-percent GST will replace the 10 percent sales tax for cars.

 

However, he said that it would be minimal as the reduction would range between one and three percent, which translates to RM200 to RM300 per car.

 

While Madani encourages manufacturers to reduce car prices when GST is implemented, he also suggested customers to purchase a car now, without waiting for it.

 

“If you wait for GST, you can get a minimum reduction of one to two percent. But if you trade in then, the depreciation will more than one to two percent. So, why wait?” he queried.

Editor's note: A correction was made to the article on Jan 14, following a letter to the editor by MAI.