Foreign cars getting more affordable

Kuala Lumpur (The Star/ANN) - In a world where prices keep going up, it's good to know some things are going in the opposite direction.

That trend has been seen in the automotive sector and in Malaysia that has meant cars are becoming increasingly more affordable for consumers.

Now, it all just boils down to a choice to satisfy your whims and desires.

Prices are already reaching a narrow difference, with the recently launched Nissan Almera priced at an affordable price of 66,800 ringgit (US$22,000) in October 2012.

Despite a difference in specifications, it is marketed as a model similar to the likes of the Proton Preve, Proton Persona, and the Perodua Myvi. These national cars are priced at a range between 42,000 ringgit (US$14,000) to 72,000 ringgit (US$23,500).

The perceived lowered prices of foreign made brands had also caused a ripple effect in the automotive industry, triggering a price war among industry players towards the end of last year.

To that end, the Malaysian Automotive Institute chief executive officer Madani Sahari tells StarBizWeek that this is the effect of liberalisation.

"Liberalisation of the automotive industry is a key factor to reduce car prices. The Government has been responsible to liberalise the automotive industry through various measures.

"From January 2010 onwards, the Asean Free Trade Area (AFTA) is already effective which means import duty has been zero from within the region with removal of quantitative restrictions for completely built up (CBU) vehicles from Asean. Imports of CBUs within Asean had increased by 28.6% in 2011," he says.

Madani says that AFTA with Japan and Australia will come into full force from 2016 onwards. That could very well mean cheaper cars down the road. In years past, foreign marques have been priced at a non-competitive price as they cost much higher to widen the price gap between the national makes churned out by Proton and Perodua.

While this was done in a bid to protect the national car industry that was in its infancy stages, it had instead turned into a double-edged sword that had bred inefficiencies. That has made national carmakers work harder today to remain relevant to the market.

Although the two national car companies have been encouraged to grow in spite of the veil of protectionism, the moat surrounding non-national carmakers had forced the others to price their vehicles at a big premium to the Malaysian-made cars. According to an industry source, the Government had previously focused on the final sale price of non-national cars (the practice was stopped in 2006), instead of looking at what is reasonable, in a bid to protect the national car industry.

No doubt the intent was noble but non-national car distributors were encouraged to inflate the on-the-road (OTR) price for cars via other factors, coupled with the excise duties and import duties.

"The OTR price of cars can be increased by different ways, where marketing cost, dealer's margin, accessories and other costs can be factored in. "These are the variables that can be controlled by the distributors to inflate the price of cars more," says the source.

According to him, these costs include provisions for marketing and promotion, over trade value, and dealers' margin.

He says going by sales numbers, Malaysia had turned into one of the more profitable markets for these OEMs that had a base here.

Recognising this as a flaw, he says the government had recently requested the non-national car distributors to review their cost and price structure to look at ways to lower prices, and the outcome was the launch of the Nissan Almera at such an attractive price.

Since Oct 2012, there have been attempts to reduce car prices, and checks by StarBizWeek reveal that car prices has gone down by a fair bit compared with prices before October.

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