Why are cars so expensive in Malaysia?
Pakatan Rakyat’s recent announcement that it would cut excise duties on new cars have caught the Federal Government off-guard, leading to a flurry of rebuttals from government leaders stung by its refreshing proposal.
Opposition Leader and PKR adviser Anwar Ibrahim has promised to bring down car prices if the opposition pact wins the general election widely expected to be held soon (read We won’t burden the people with high CAR PRICES – Anwar).
A can of worms
The plan reiterated last week by PKR strategic dirctor Rafizi Ramli has opened a can of worms, with Malaysians coming to the stark realization that they have been suckered into paying ridiculously high prices for a set of wheels.
While, most Malaysians are contented with a new Proton, there are those who would spare no money and effort to acquire an imported car to reflect their upcoming lifestyle.
But look at the difference between buying an imported car in this country and one in a first world country like the USA and Great Britain. For example a Volkswagen Golf costs RM60,000 in other countries, while in Malaysia it costs RM150,000 or a Toyota Camry at RM90,000 while in Malaysia it costs RM180,000. It is too big a sum to shrug off, and people certainly do feel ripped off.
Anwar’s welcomed proposal has prompted Minister in the Prime Minister’s Department Nor Mohamed Yakcop to retort that getting rid of taxes for cars would reduce national revenue by RM7 billion which could affect infrastructural development, especially in Sabah and Sarawak, and in the interior of the peninsula.
The nation will also experience economic instability with many people and industries going bankrupt if the price and excise duty of vehicles are reduced, Nor added.
Meanwhile President of the Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) Tony Khor said the easing of car prices and their excise duties will bring significant losses to the owners of more than 10 million cars in the country due to devaluation.
Khor also said the proposal will badly affect the used car industry and result in steep losses as consumers will choose to buy new, cheaper cars over used cars. He also admitted that, although the price of cars in Malaysia was higher than in other countries, the price of petrol in the country was still lower.
The rakyat are unconvinced
Many critics feel that his argument doesn’t hold water as the used car industry is already facing difficulties securing adequate financing, with banks preferring to finance new vehicles instead.
Most Malaysians would buy new cars as the down payment has been reduced to a mere 10percent or less, while the down payment for used cars hovers at around 30percent of the car price.
A vehicle is no longer a luxury, but a necessity. Taxing the consumers unnecessarily will only make the Rakyat ‘more bitter’ towards the government.
Petrol prices are affordable because Malaysia is an oil exporter, but many are doubtful that our petrol price is really that cheap, in comparison to other oil producing countries.
Khor’s logic to maintain excise duties would keep car values from dropping is laughable, when you are creating a situation where you have to pay an artificially inflated price for your car to maintain its future value.
A diminishing asset
Cars will always remain a depreciating asset and a liability and it will remain so for the entire time you own it. The moment it leaves the showroom it has already lost 30 percent of its value.
If we don’t take the initiative and first step even though it’s painful, that means we are going to be stuck with high car prices forever! “I don’t mind suffering a loss with my existing cars but in the long run I’ll be able to buy cheap and quality cars,” according to one motorist.
“In the long run the entire Malaysia citizenry, except for the AP cronies, will benefit,” commented another one!
The Proton Monster
Most of the Rakyat do not feel any love or loyalty for Proton, even though it is a home grown car manufacturer. In fact, many believe Proton should cease operations if it still cannot make and maintain profits after all the years of government protection.
For how long more must Proton be dependent on crutches and subsidies to keep itself afloat. Rearing a ‘loser’ car industry that cannot compete in the open market is not economically viable for the country.
If protective taxes are cut and prices are reduced, Proton will be stark naked and many doubt that it would be able to compete unaided in a free market economy.
Cheaper cars means more savings
Cheaper cars would also mean easier repayments, lesser bank interest, and lower insurance costs – all of which are less taxing on the consumers. The extra savings would stimulate our economy and produce a vibrant and healthy industry.
Cheaper cars would also allow more people to buy and own cars, which will benefit the car industry in the longer run. Malaysians are tired of driving around in bashed-up cars with old engines that leak and smoke. But many are unable to afford a decent car to ferry their families.
Affordable shelter for the masses
So after weighing the pros and cons, its a ‘Yes’ to the PKR plan.
This once-off adjustment will save the Rakyat billions of ringgit, providing long term relief and a chance to purchase their dream home. That’s right, I said ‘home’.
Can anyone imagine that Malaysia is possibly the only country where the prices of cars are almost equivalent to the price of a house or an apartment? Even foreigners shake their heads in disbelief at the absurdity of it all.
Outside of the Klang Valley, one can find a hoard of cheap apartments and single-storey link houses for the price of a Proton Persona.
So if the Federal Government continues to evade this pressing issue and makes lame excuses instead to justify the continued daylight robbery of the Rakyat in the form of so-called excise duties, it will only backfire on them. -hornbillunleashed