No To Cheaper Cars?

(The latest Toyota Camry 2.5 is priced RM180,000 in Malaysia whilst the premium model only costs RM91,000 in US. So why is the huge difference in the car pricing in this country? Imagine source: TheCarGuys)

Folks, the general elections are coming soon and as I mentioned in my blog in the past, we must insist on voting for politicians who are able to see the bigger picture and be more intelligent enough in ensuring the issues that they raise in the public arena are of public interest and shapes the general policy and direction of this country.

One of the recent issues that were raised is the Pakatan Rakyat’s proposed plan to reduce price of cars in this country.

The proposal to reduce the prices of cars in this country by Pakatan Rakyat (an issue where a proper closure has been long overdue) if they are voted into power has sent a rather disturbing ripple among BN politicians. The reasons and the benefits to reduce car prices obviously works in good favour of the ordinary citizens and yet, we have not seen any BN politicians (except perhaps this guy) who had come out in the open with full support of this proposal.

Why? Is it because the proposal was initiated by the opposition and thus the support for the proposal is seen as a support for the opposition?

In argument against the said proposal, some argued that it will put the local automotive industry at a disadvantage once foreign cars were made cheaper. Valid argument no doubt but then again, how long more the local automotive industry needs to be able to compete on a global sense after almost 30 years in existence? Others try to stir racial issue by saying that the majority employed in the industry from a particular race and the impact of cheaper cars means a challenge to the race’s rights, which is rather nonsense as all races in this country are also involved in the industry one way or another.

Then we have this argument:-

Dalam keghairahan Pakatan Rakyat untuk menurunkan harga kereta, mereka terlupa untuk memberi maklumat kepada rakyat Malaysia apakah impak cadangan tersebut terhadap kualiti alam sekitar dan kenaikan sisa karbon serta kesesakan lalu lintas di jalanraya.

Ramai orang merasakan cadangan mengurangkan harga kereta ini bercanggah dengan tindakan kerajaan untuk menubuhkan Suruhanjaya Pengangkutan Awam Darat (SPAD) yang dipertangggungjawabkan untuk mereformasikan sistem pengangkutan awam di negara kita.

Seperkara lagi, orang kampung di luar bandar tidak akan mampu untuk membeli kereta walaupun harga kereta diturunkan. Tetapi mereka akan merasa implikasi dari cadangan ini. Besar kemungkinan mereka terpaksa berkorban kerana sekolah dan klinik di kawasan pendalaman terpaksa di kurangkan akibat kekurangan peruntukan pembangunan disebabkan cukai kereta berbillion ringgit yang dipungut oleh kerajaan sudah berkurangan.

Ini belum lagi membicarakan tentang komitmen negara kita untuk mengurangkan intensiti karbon negara sebanyak 40% sepertimana yang diperakui oleh Malaysia dalam Protokol Kyoto.

(Source)

The MP for Kota Belud raises two key issues in response to Pakatan Rakyat’s call to reduce the price of vehicles in this country. One is the impact on the environment due to more vehicles purchased (since it is cheaper acquire them now) and two, the expected increase in traffic jam. He also said that the call for cheaper car is going against the on-going reformation of the public transport by the Government (although I don’t see the direct implication of cheap car on the reformation process as public transport still need to be reformed regardless whether cars are made cheaper or not) and the Government would lose a sizeable income and will cause the country unable to meet the carbon intensity by 40% as dictated by the Kyoto Protocol.

Before that, let’s ponder why Pakatan Rakyat is calling for reduction of car price in the country in the first place?

High taxation is the reason why cars are so expensive in Malaysia. Currently, according to Rafizi, Malaysians pay 70% in taxes when they buy locally-made cars of below 1,500cc.

“Buyers end up paying almost RM16,500 in excise duties and sales tax for a car worth RM40,000,” he said. “On top of that, car owners also pay about 4% in interest for the loan.” According to his estimation, a typical car owner in Malaysia pays nearly RM600 a month towards settling his car loan. Toll charges and the cost of petrol would take up another RM400 of his monthly income.

Rafizi said Pakatan would phase out excise duties on cars to reduce household debt and increase disposable income.

Citing the Statistics Department’s Household and Basic Amenities Survey Report 2009, he said 53% of Malaysian households earn less than RM3,000 a month. “The report also shows that 71.9% of Malaysians own a car,” he said. “High car installments have become one of the reasons Malaysians are burdened with huge debt.”

As of May 2012, car loans repayment ranked second highest in household debt, standing at a staggering RM134 billion, he added.

(Source)

It is not a big secret that Malaysians are paying ridiculous price for cars in this country compared to other countries. And a bulk of the price is attributed to excise duties and sales tax. And seriously I am in favour for cheaper cars – the benefits are just too obvious – more people will be able to drive in cars that are safer, more economical, environmental friendly and equipped with better technology. And with car price cheaper, the hire purchase amount would be lower and Malaysians would have more disposal income for their family, education and healthcare. If you think about it, a good portion of the hire purchase loan is now being used to pay off a bulk of the excise duties and sales tax which has incorporated into the overall car price. This means we are in high debt to pay taxes to the Government.

Let’s leave aside the issue of the impact on the local automotive industry (there will be some impact no doubt but what is more important is how the industry plans to address the current shortcomings and go head to head in the global market) and on how Pakatan intends to make up the loss of a sizable income for the Government due to reduced excise duties and sales tax.

Let’s focus on the Kota Belut MP’s 2 main argument’s against the lowering the cost of cars in this country.

Impact on the Environment

(The standard that we use for emission evaluation – the European Emission Standard which started back in 1992. Where is the Malaysian version of this? Image source: Wikipedia)

We must recognize that modern cars are far more efficient than the cars that we drove 10 – 20 years ago. With the influx of hybrid cars and cars that meet the European emission standards (with EURO 6 coming up soon in 2014), the impact on the environment is low and in general sense, is improving with a more stringent emission standards put in place.

If we still insist on meeting the reduction of the carbon intensity by 40% as dictated by the Kyoto Protocol, then we should not only address the emission from vehicles on the road but also holistically, greenhouse gas emission from other industries (such as the energy industry) as carbon dioxide is just one of the greenhouse gas identified in the Protocol. And if we are only looking at emission from vehicles, then shouldn’t we insist on a stringent emission standards for all vehicles in this country? We don’t have our own emission standards but often rely on European emission standards and how many vehicles in this country meet the latest European emission standards? Only the very latest Proton models (running on Campro CFE with CVT) seem to meet the latest EURO 5 emission standard but what about the rest?

Average Car Carbon Emission in European Union Countries = 160 g/km
Target for 2012 = 120 g/km
Target for 2020 = 80 g/km

Proton Gen-2 Carbon Emission = 157 g/km (ranges from 131 to 192 g/km for other models)
Proton Waja/Impian Carbon Emission = 167 g/km (manual transmission) 172 g/km (auto transmission)
Proton Satria Neo Carbon Emission = 177 g/km
Proton Savvy Carbon Emission = 134 g/km

Proton Waja and Proton Satria Neo beat the average car carbon emission in Europe. Seems like Proton Savvy is the greenest of all (not so green though) at 134 g/km considering that it is only a 1200 cc.

If you drive your car 10,000 miles per year and have an average polluting car (i.e 160g/km of carbon emissions) then every year your car will emit 2.6 tonnes of Carbon Dioxide. If you wish it offset this amount by planting trees you would need to plant at least 4 trees for every year you spend driving the car.

Proton’s cars are not so green. In fact, there are no information regarding carbon emission in Proton’s official website or Proton’s brochure. It is only mentioned “Low carbon emission” in the sales brochure. Well, not so low after all!

(Source)

We still have “tonnes” of older Proton models on the road, still emitting greenhouse gases year in, year out. Why not we enforce the emission control on them and other older models? By making the price of new cars cheaper, aren’t we accelerating the change of the older fuel guzzling, higher greenhouse gases emitting vehicles to newer fuel saving, lower greenhouse gases emitting vehicles?

Impact on the Traffic Jam

Even with the current high cost of car ownership, there is no positive improvement on the traffic jam especially in the Klang Valley and other major cities.Perhaps the situation is all rosy and well in Kota Belut but not so here – just try to drive during the peak hours and see how fast you can go.

This is because we have to come to a situation where having a car is no longer a luxury but rather a bare necessity. It is also safer and more convenient compared to one using the public transport (which is still in the process of revamping itself). Most household these days have at least 2 cars as it is also necessary for housewives to drive for daily shopping and to send & pick up their kids from school, etc. So before we can argue that cheaper cars means worsening traffic jams, we need to see the condition of traffic movement at the present and what is being done to elevate the situation.

Just look at Klang Valley with it’s all road infrastructure and public transportation integration at the very best, the traffic condition is still bad. Number of cars on the road is obviously a reason for the bad traffic jam but there are other factors as well. Queue jumping at key bottlenecks chokes the overall traffic system and gets cascaded all over. Another is the lack of feeder roads to the main roads especially from one residential area to another. The traffic jam is made worse due to high number of vehicles with low occupancy rate (just check and see how many people in most of the cars) and a lack of coordinated travel time similar to the one deployed during the festive season (or based on registration number which will force a greater use of public transport) for day to day travel to and fro workplace.

If cars are made cheaper, it will not necessarily means that the traffic jam will get worse (it already is) by a very drastic rate. There will be some increase (perhaps by those motorcyclists who now can afford to buy cars) but how much the increase will be is highly dependant on other factors as mentioned above. And there are others costs need to be considered as well – maintenance charges, parking, toll and fuel which will play crucial role on those who wants to drive around in a car on a daily basis.

Final Say

It is easy to say that all of Pakatan’s ideas are bad ideas and throw-in the usual arguments towards it but we need a solid solution for the existing problems as well. In the case of Pakatan’s call for cheaper cars in this country, one would strongly agree that there will be a major impact on the local automotive industry and the revenue for the Government (which Pakatan said is manageable if the general expenses are well managed) but then again, does that mean we should keep the car prices arbitrarily high and keep the people in high debts and away from better quality, safer & a more environment friendly cars?

If the Government is not agreeable in reducing the car price down, then what would be the alternative measures to increase the household disposable income of those who need to use a car for their daily routine and yet a bulk of their income is tied to high car price & loan? A more flexible hire purchase arrangement (like using monthly rest and not Rule 78 or multi tier hire purchase rate) or perhaps some kind of long term cash rebate or sales tax relief for those who drive a more eco-friendly (remember we need to address the targets under the Kyoto Protocol) cars? Or perhaps some staggered tax policy that based on the capacity of the vehicle and net income of the car owner?

Can we have this now? No, not the cheaper price for cars but rather, a better focus of the issues at hand.

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