Review of the National Automotive Policy on Car

Transcription

MIROS Review Report
MRev 02/2012
Review of the National Automotive Policy
on Car Maintenance Issues: Malaysia’s
Automotive
Autom tive Ecosystem Explained
Zulhaidi Mohd Jawi
Fauziana Lamin
Abdul Rahmat Abdul Manap
Khairil Anwar Abu Kasim
Fuad Abas, P Eng
Wong Shaw Voon, PhD
MALAYSIAN INSTITUTE OF ROAD SAFETY RESEARCH
MIROS Review Report
MRev 02/2012
Review of the National Automotive Policy
on Car Maintenance Issues: Malaysia’s
Automotive Ecosystem Explained
Zulhaidi Mohd Jawi
Fauziana Lamin
Abdul Rahmat Abdul Manap
Khairil Anwar Abu Kassim
Fuad Abas, P Eng
Wong Shaw Voon, PhD
MIROS © 2012 All Rights Reserved
Published by:
Malaysian Institute of Road Safety Research (MIROS)
Lot 125-135, Jalan TKS 1, Taman Kajang Sentral,
43000 Kajang, Selangor Darul Ehsan.
Perpustakaan Negara Malaysia
Cataloguing-in-Publication Data
Review of the national automotive policy on car maintenance issues :
Malaysia’s automotive ecosystem explained / Zulhaidi Mohd Jawi ... [et al.]
(MIROS review report MRev 02/2012)
Bibliography: p. 30
ISBN 978-967-5967-31-3
1. Automobile Industry and trade--Government policy--Malaysia.
2. Automobile--Malaysia--Maintenance and repair. I. Zulhaidi Mohd Jawi.
II. Series.
629.28722
For citation purposes
Zulhaidi MJ, Fauziana L, Abdul Rahmat AM, Khairil Anwar AK, Fuad A, SV Wong (2012), Review of the
National Automotive Policy on Car Maintenance Issues: Malaysia’s Automotive Ecosystem Explained,
MRev 02/2012, Kuala Lumpur: Malaysian Institute of Road Safety Research.
Printed by: Publications Unit, MIROS
Printed by
Typeface
Size
: Publication Unit, MIROS
: Goudy Old Style
: 11 pt / 15 pt
DISCLAIMER
None of the materials provided in this report may be used, reproduced or transmitted, in any form or by any
means, electronic or mechanical, including recording or the use of any information storage and retrieval
system, without written permission from MIROS. Any conclusion and opinions in this report may be subject
to reevaluation in the event of any forthcoming additional information or investigation.
Review of the National Automotive Policy on Car Maintenance Issues : Malaysia’s Automotive Ecosytem Explained
MRev 02/2012
Contents
List of Terms, Acronyms and Abbreviations
List of Tables
List of Figures
Acknowledgement
Abstract
Page
v
viii
ix
xi
xiii
1.
Introduction
1.1. National Automotive Policy
1.2. Scope of the Discussion
1.3. Objective of the Study
1.4. Materials and Method
1
1
1
2
3
2.
A Look into Car Ownership in Malaysia
2.1. Private Cars in Malaysia
2.2. Car Ownership
4
4
5
3.
Roadworthiness and Car Maintenance
3.1. Preventive Maintenance
3.2. Corrective Maintenance
3.3. Predictive Maintenance
5
6
6
7
4.
Malaysia’s Automotive Ecosystem – Car
4.1. Product Life Cycle
4.2. Source of Vehicle
4.2.1. Foreign OEMs
4.2.2 Local OEMs
4.2.3. Used car market
4.3. Purchasing Scheme
4.4. Ownership Cost
4.4.1. Trip cost
4.4.2. Legal cost
4.4.3. Risk cost
4.4.4. Aftermarket cost
4.4.5. Car ownership overview – Cost and maintenance
7
7
8
9
10
11
12
12
13
13
14
14
15
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iv
4.5. Vehicle End-of-Life (ELV)
4.6. The Automotive Ecosystem
16
17
5.
Car Maintenance Issues with Regard to Users
5.1. Car Users’ Economic Factors
5.1.1. Choice of car in the market
5.1.2. Cost of maintenance services
5.2. The Availability of Inappropriate Automotive Parts Resources
5.2.1. What the market has to offer
5.2.2. Substandard/fake products
5.2.3. Less popular and aged/antique cars
5.3. Car Users’ Knowledge and Awareness
19
19
19
20
20
20
21
21
21
6.
Challenges: NAP vs. Status Quo
6.1. A Look into “Segment E: Efforts for Increased Safety” in NAP
6.2. Challenges Waiting for the Implementation of “Used Parts
Measure” in NAP
6.2.1. Car ownership costing – Economic burden
6.2.2. The status quo of the automotive ecosystem as a barrier
6.2.3. The seemingly incomplete loop
6.2.4. Concerted effort among the government agencies
6.3. Future Research
22
23
25
25
26
27
27
28
7. Conclusion and Recommendation
28
References
30
Appendix A
Appendix B
Appendix C
34
35
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List of Terms, Acronyms and Abbreviations
AP
Approved Permit
ADF
Automotive Development Fund
ASEAN
Association of Southeast Asian Nations
CBU
Completely Built-up
CDL
Competence Driving License
CKD
Completely Knocked Down
CM
Corrective Maintenance
DIY
Do-It-Yourself
ELV
End-of-Life Vehicle
EU
European Union
FLM
Full Local Manufacture
FTA
Free Trade Agreement
HGV
Heavy Goods Vehicle
IMP3
The Third Industrial Master Plan
IAF
Industrial Adjustment Fund
ITA
Investment Tax Allowance
KeTTHA
Kementerian Tenaga, Teknologi Hijau dan Air
Ministry of Energy, Green Technology and Water
KPDNKK/MDTCC
Kementerian Perdagangan Dalam Negeri, Koperasi dan Kepenggunaan
Ministry of Domestic Trade, Co-operatives and Consumerism
JKDM/RMC
Jabatan Kastam Diraja Malaysia
Royal Malaysian Customs
JKJR/RSD
Jabatan Keselamatan Jalan Raya
Road Safety Department
LKM
Lesen Kenderaan Motor
Motor Vehicle License
MATRADE
Malaysian External Trade Development Corporation
MC
Mitsubishi Corporation
MFN
Most Favoured Nation
MIDA
Malaysian Industrial Development Authority
MIL
Malfunction Indicator Light
MIROS
Malaysian Institute of Road Safety Research
MITI
Ministry of International Trade and Industry
Kementerian Perdagangan Antarabangsa dan Industri
ML
Manufacturing License
MMC
Mitsubishi Motor Corporation
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MOSTI
Ministry of Science, Technology and Innovation
Kementerian Sains, Teknologi dan Inovasi
MOT
Ministry of Transport
Kementerian Pengangkutan
MOF
Ministry of Finance
Kementerian Kewangan
MPV
Multi-Purpose Vehicle
MVA
Motor-Vehicle Accident
NAP
National Automotive Policy
NCB/NCD
No Claims Bonus/No Claims Discount
NRE
Ministry of Natural Resources and Environment
Kementerian Sumber Asli dan Alam Sekitar
OEM
Original Equipment Manufacturer
PdM
Predictive Maintenance
PM
Preventive Maintenance
PS
Pioneer Status
R&D
Research and Development
REM
Replacement Equipment Manufacturer
RON
Research Octane Number
RMP/PDRM
Royal Malaysia Police
Polis Diraja Malaysia
RTD/JPJ
Road Transport Department
Jabatan Pengangkutan Jalan
SME
Small and Medium Enterprise
SUV
Sports Utility Vehicle
TIP
Total Industry Production
TIV
Total Industry Volume
VSB
Vehicle Safety and Biomechanics Research Centre (MIROS)
VTA
Vehicle Type Approval
WTO
World Trade Organization
Notes:
vi
1.
The names of some government’s ministries and agencies are available in both
English and Bahasa Malaysia versions. The authors had tried their best to provide
the names in both languages; however, the abbreviations that have been chosen and
primarily used in the report are merely based on the authors’ discretion.
2.
Some of the terms featured in this report are colloquial or domestic terms that are
widely used in the country. Appropriate footnotes or descriptions are provided in the
report for these terms:
Term
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Equivalent term in Bahasa Malaysia
Authorised shop
Wakil servis
Half-cut car
Kereta potong/kereta sambung
Half-cut shop
Kedai potong
Re-con/recon
-
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List of Tables
Page
Table 1
Table 2
Table A1
Table A2
Table B1
viii
Ownership cost
Measures in National Automotive Policy
Objectives of National Automotive (NAP) Policy
Objectives of National Automotive (NAP) Policy Review
Vehicle types in EU directives
13
22
34
34
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List of Figures
Page
Figure 1
Figure 2
Figure 3
Figure 4
Figure 5
Figure 6
Life cycle of a product
Automotive ecosystem (simplified)
Source of car in Malaysian market
Ownership costs and maintenance supply
Automotive ecosystem in Malaysia
Mapping of NAP measures in Malaysia’s automotive ecosystem
8
8
9
16
18
24
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Acknowledgement
The authors would like to express their heartfelt gratitude to all who had given
support, interest and ideas during the discussion as well as during the report
writing. Also, we take this opportunity to convey our sincere thanks to the
former Director-General of MIROS, Prof. Dr. Ahmad Farhan Mohd Sadullah,
for his guidance and support towards the completion of this report.
Special mention goes out to:
Ministry of Transport (MOT)
Rohaini Mohd Yusof – Under Secretary, Land Division
Veejendran Ramdas – Principal Assistant Secretary, Road Transport Unit
Siti Nooraznie Abdul Rahim – Assistant Secretary 2, Road Transport Unit
Jabatan Keselamatan Jalan Raya (JKJR)
Sahipulhijaiman Shaharuddin – Bahagian Dasar dan Kemajuan
Malaysia Automotive Institute (MAI)
Mohamad Madani Sahari – Chief Executive Officer, MAI
Hazrina Hassan Khalep – Strategic Research
Malaysian Institute of Road Safety Research (MIROS)
Sharifah Allyana Syed Abd Rahim – Research Officer, ADSA
Hizal Hanis Hashim – Research Officer, ADSA
Azhar Hamzah – Research Officer, CRASE
Mohd Syazwan Solah – Research Officer, CRASE
Mohd Hafzi Md Isa – Research Officer, CRASE
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Abstract
The objective of this study is to develop a conceptual model of the Malaysian
automotive ecosystem with special reference to car maintenance issues. The
methodology of the study is separated into two; a series of focus group discussions
and extensive literature reviews. Focus group discussions were conducted as a
precursor to the study. The aim of these discussions was to gather information
on outstanding issues related to the currently reviewed National Automotive
Policy (NAP) measures, particularly with regard to the NAP measure No. 12 –
“Gradual phasing-out of imported used parts and components”. The discussions
involved internal discussions within MIROS and also external discussions
involving representatives from other related ministries/agencies such as MOT,
MITI, MOSTI and KPDNKK. Extensive literature reviews included peerreviewed journals, proceedings, published and unpublished reports from the
web, as well as news and automotive web portals. Furthermore, 16 published
reports, seven peer-reviewed journals and eight web-based reports/articles were
referred to for this analysis. A conceptual model of the domestic automotive
ecosystem is proposed in this paper. The economic model and implication,
challenges of implementing NAP measures and relevant future research are
discussed within the framework of this proposed model.
xiii
1.
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Introduction
This report draws heavily from a group discussion on “vehicle maintenance
issues” at the Malaysian Institute of Road Safety Research (MIROS) involving
research officers1 from the Vehicle Safety and Biomechanics Research Centre
(VSB). The team has been formed at the VSB level in order to support the
Ministry of Transport (MOT) regarding the implementation of the National
Automotive Policy’s (NAP) measures, which have been reviewed by the Ministry
of International Trade and Industry (MITI) (MITI 2009). The Ministry of
Transport is one of the ministries in the Malaysian government that is heavily
involved in the implementation of previous NAP measures and also in the
currently-reviewed policies.
1.1. National Automotive Policy
The National Automotive Policy (NAP) was first introduced back in 2006 by the
Ministry of International Trade and Industry (MITI) as a guide in strengthening
the automotive sector under the Third Industrial Master Plan (IMP3) 2006–2020
(MITI 2009; MIDA 2010). The measures in NAP, as for the previous and recent
release, mainly focus on the well-being of the automotive sector in Malaysia in
terms of competitiveness (protective measures for domestic ventures), industry
expansion, Bumiputera2 participation in the industry, and consumers’ interests
(Table A1 and Table A2 in Appendix A) (Prime Minister’s Department 2005;
MIDA 2010).
1.2. Scope of the Discussion
In this report, the scope regarding maintenance issues had been narrowed down
to matters relating to passenger vehicles segment, as described in the following.
i. Passenger vehicles (four-wheelers) include cars, multi-purpose vehicles
(MPVs), and Sports Utility Vehicles (SUVs). However, whenever the term
“car/cars” is used in this report, it also refers to all types of passenger vehicles
1
2
From here will also be referred to as “the authors” or “the team”.
The term Bumiputera denotes ethnic Malays of Muslim religion and indigenous inhabitants of East and
West Malaysia (Mohd Rosli 2006).
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mentioned above. In terms of division of vehicles, the abovementioned
passenger vehicles are in the M1 group (e.g. In EU directives as mentioned
in SWOV (2007) – Table B1 in Appendix B).
ii.
Issues on motorcycle—despite the fact that this mode of transport is the
largest population of registered motorised vehicles in the country—require
a separate discussion since the relationship between its production and
safety maintenance is quite different as compared to that of cars. This can
be explained by the concerns on the vehicle regulations; safety design and
construction (roadworthiness and crashworthiness); vehicle maintenance
routine during the usage term; and also the interaction of motorcycle in
motor-vehicle accident (MVA) in terms of crash configuration, occupant
protection and injury biomechanics.
iii. Nevertheless, the content/flow/relevancy of this discussion may also be
applied/true for other type of vehicles (other than M1 including motorcycle)
especially when it comes to discussing the National Automotive Policy
(NAP) as a whole.
1.3. Objective of the Study
The general objective of this study is to review the automotive ecosystem in
Malaysia in order to explain car maintenance issues and other safety concerns;
so that it can help understand the subject matter of the measures in the currently
reviewed National Automotive Policy (NAP).
The term “ecosystem”, despite originating and being widely used in the ecology
field, is used in this report in order to represent the interaction between the
industry and users/consumers in the life cycle of cars. In addition, the term
“automotive ecosystem” has also been used in other reports of similar focus
such as IBM Global Business Services’ Report – “Automotive 2020: Clarity
beyond the chaos” (Sanjay Rishi et al. 2008).
Specifically, this report will explore and establish the issue based on the
following topics.
i. Private passenger vehicles in Malaysia in terms of production and usage/
ownership.
2
ii.
iii.
iv.
v.
vi.
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Roadworthiness and car maintenance.
Malaysia’s automotive ecosystem in a conceptual model.
Issues of car maintenance in terms of cost, knowledge and supply of parts.
Challenges posed by the “status quo” to NAP.
Future/potential research.
1.4. Materials and Method
A major part of this report was derived from a series of discussions and extensive
literature review by the authors. For the literature search, the key words used
were, among others, “automotive maintenance”, “automotive parts failure”,
“vehicle ownership”, and many others. The team has referred to the following
categories of materials during the study.
i. Peer-reviewed journals.
ii. Conference proceedings.
iii. Reports – published and unpublished; including reports that are available
on the web.
iv. News – printed as well as web-based news.
v. Web portals – automotive and economic/business.
In addition, the participation of the authors as MIROS’ representatives in
several meetings held at different ministries with regard to NAP implementation
(i.e. at MOT, MITI, MOSTI3 and KPDNKK4) had also contributed to the
understanding of the overall automotive ecosystem, in terms of the automotive
industry background, external and internal trade, enforcement, and consumer
issues.
The team was then able to produce a conceptual model of the automotive
ecosystem in Malaysia; the car maintenance issues have then been discussed
within the said framework.
3
4
Ministry of Science, Technology and Innovation or Kementerian Sains, Teknologi dan Inovasi.
Kementerian Perdagangan Dalam Negeri, Koperasi dan Kepenggunaan or Ministry of Domestic Trade, Cooperatives and Consumerism.
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2.
A Look into Car Ownership in Malaysia
2.1. Private Cars in Malaysia
It is evident that road transport dominates Malaysia’s transportation sector,
whereby the road network covers 96% of the economic activities for transporting
goods and passengers (Judin Abdul Karim 2008). On top of that, the share of the
passenger sector is further divided into private cars and public transports. The
former has the biggest share with 65%, while the latter takes up the remaining
30% (Judin Abdul Karim 2008). On another note, a public survey conducted by
Abdalla et al. (2007) has found out that local road users have high preference for
the use of their personal vehicles rather than public transportation due to the
convenience factor. This factor could be one of the reasons that contribute to
the fact that vehicle ownership has considerably increased over the last decade
(Radin Umar 2007).
A high demand of private vehicles may also explain the encouraging scenarios
in domestic automotive industry. The domestic motor vehicle market represents
approximately 30% of the total demand in the five largest ASEAN economies—
Indonesia, Malaysia, the Philippines, Singapore and Thailand (Li Wei et al.
2008). The production of vehicles5, as observed in the last 10 years, achieved an
average of 400,000 vehicles per year with approximately 75% from that figure
being passenger vehicles (Lily Amelia et al. 2009).
Furthermore, vehicle sales in Malaysia are dominated by local car manufacturers
by virtue of government policies that protect the local automotive industry
i.e. via tariff and non-tariff barriers (Mohd Rosli 2006). For instance, major
local car manufacturers in Malaysia—Proton, Perodua and Naza—had grabbed
around 60% of the market share6 in 2007 (Lily Amelia et al. 2009). Also, the
development of the domestic automotive industry has helped the growth of
the related industries, including Small and Medium Enterprises (SMEs) as
component manufacturers or sub-assemblies.
5
6
4
Total Industry Production or TIP.
Total Industry Volume or TIV.
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2.2. Car Ownership
The life cycle of a car, likewise other products, will reach the usage stage
after going through the production stage. In the usage stage, it will be used
for various purposes and in various driving conditions. In that period of “car
ownership”, an owner of a car is supposed to bear the cost of travels as well as
its maintenance cost, so that it will always be safe, reliable and roadworthy.
Based on the fact that Malaysia does not only produce cars but also manufacture
automotive components (MIDA 2010), local car owners should not face any
difficulties in acquiring aftermarket products. These products that include
vehicle parts, chemicals and accessories should be easily accessible from the
market and also be priced relatively lower than imported products. However,
the issues of car maintenance do not only revolve around the sources of the
aftermarket products, since the status quo of Malaysia’s automotive ecosystem
suggests that many gaps still need to be addressed.
3.
Roadworthiness and Car Maintenance
Vehicle maintenance is one of the major concerns in road safety as it can prevent
mishaps due to defects in a car’s roadworthiness. Poor vehicle maintenance may
not just pose dangers to the owners/drivers and their passengers, but also to
the safety of other road users as it could be a primary reason for a road accident
to occur.
Roadworthiness, as elaborated in several publications (e.g. VOSA 2008; NTC
1995; Rechnitzer et al. 2000), gives an idea that a vehicle is fit according to
accepted standards prior to use on the open road. Thus, it is important to
ensure that a car is well-maintained in order to keep its roadworthiness as
good as when it passed the quality inspection at the assembly line. This is
certainly far from ideal since all car components and the overall system will
be degraded over time due to use and many other factors. That should explain
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why vehicle maintenance, which includes preventive, corrective and predictive
maintenance, becomes important routines in the ownership period until a car
hypothetically reaches its end-of-life (ELV) stage after 10 to 15 years7.
3.1. Preventive Maintenance
Periodic or Preventive Maintenance (PM) is conducted to keep car systems and
components in working order, as well as to extend their lives.
This routine, among others, include:
i. changing engine lubricant after certain recommended kilometre-age (e.g.
5,000 km);
ii. replacing the timing belt (e.g. 100,000 km);
iii. performing tyre rotation (e.g. every six months or 10,000 km); and
iv. changing the transmission fluid (e.g. 40,000 km).
3.2. Corrective Maintenance
Reactive or Corrective Maintenance (CM), or usually referred to as “repair”,
is conducted to restore the original functionality of the parts, subsystems, or
systems in a car.
Due to wear-and-tear, signs of damages or road accidents, car owners may react
to the situation by:
i. Repairing/servicing the existing component/system; or
Certain components/systems are serviceable, or can be fixed.
ii. Replacing the existing component/system.
Replacement can be considered as compulsory if damage/failure involves
critical parts, sub-systems or major systems.
There are perhaps a number of car owners who may not react to the conditions
mentioned above, however, that can only be appropriate if the damages do not
involve any critical areas, or involves only cosmetic damages.
7
6
Range of car age for ELV as mentioned by Lily Amelia et al. (2009); Note that the of ELV year differs
between countries.
MRev 02/2012
3.3. Predictive Maintenance
Predictive Maintenance (PdM) is an advance stage in maintenance practice
whereby different tools are used to detect any tendency towards failure, and
necessary work will be carried out once any irregularities are detected (Leona
2007). For example, a technician will analyse an oil sample from the previous
usage to detect the presence of bearing material, or perform a scan to view data
parameters even when the malfunction indicator light (MIL) is not lit.
Predictive maintenance (PdM) is perhaps less popular due to its availability
and cost. PdM requires costly equipment and trainings, making it an expensive
investment to car workshop owners and this cost will be passed on to the
consumers (Leona 2007).
4.
Malaysia’s Automotive Ecosystem – Car
4.1. Product Life Cycle
A product will go through several stages in its life cycle, as shown in Figure 1 (Li
Wei et al. 2008). For the purpose of this discussion, the first three stages—design,
manufacturing and transportation—are grouped into the cluster of the “source of
vehicle”. The vehicle is then made available in the market as a brand new item.
A vehicle is then “handed over” to the user (owner) after purchase is made to
enter the usage stage or “vehicle ownership”. A vehicle will arrive at its endof-life (ELV) stage due to various reasons, and at this stage a retired vehicle is
ideally required to be properly disposed through certain processes.
In a broader sense, the automotive ecosystem involves two big groups of
stakeholders—the industry and the user. The industry governs the whole
automotive ecosystem while the user becomes a subset in the ecosystem as
depicted in Figure 2.
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Figure 1 Life cycle of a product (Source: Li Wei et al. 2008)
Figure 2 Automotive ecosystem (simplified)
4.2. Source of Vehicle
The car market can be divided into two segments—new and used. In the
Malaysian market, new cars can be distinguished according to the status of
their local or foreign original equipment manufacturers (OEMs). Furthermore,
cars produced by foreign OEMs can be further classified according to their
completion of manufacturing place (local or foreign assembly; fully or partially).
Therefore, based on the abovementioned fact, new cars will carry any of these
statuses (e.g. Lily Amelia et al. 2009; Andrew and Shobhana 1989):
i.
completely built-up (CBU) for foreign imported unit; or
ii.
completely knocked-down (CKD) for locally assembled unit, by either
local or foreign OEMs; or
iii. full local manufactured unit – will be referred to as “FLM”.
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The labels coined for local and foreign makes are largely influenced by the
government automotive policies. Consequently, these policies will be reflected
in the pricing of cars in the market, that is the price will be based on the tax
imposed on a car according to its status.
On the other hand, the used car segment consists of local units and imported
units (or can be referred to as refurbished unit8). Local used units are cars that
are sold either by the original owners or through used-car dealers, and imported
refurbished cars are those brought to Malaysia from other countries. In terms of
registration, local used units will bear the same registration code (plate number)
upon the change of ownership, but imported used units will be registered with
a new (current) registration code.
The overall view of the “source of vehicle” is depicted in Figure 3.
Figure 3 Source of car in Malaysian market
4.2.1. Foreign OEMs
For general understanding, a car would be better recognised by its brand name
(car make; OEM) rather than the company’s profile i.e. the actual business
structure behind it. As a result of business expansion globally, certain OEMs
have gone through several ownerships through merges or takeovers. Thus,
certain automotive companies could no longer be purely associated with
their respective original home countries. That is why it has become easier to
8
Refurbished cars are popularly known to locals as re-conditioned or colloquially “re-con” unit.
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recognise a car by its make (or badge), since it is rarely changed upon a transfer
of company ownership. However, for the purpose of this discussion, the original
home countries of the OEMs are referred just to be in line with the motivation
of the whole discussion.
Foreign car makers that have made their way into the Malaysian market are
those originating from Asia (e.g. Japan, Korea, China, and India), Europe (e.g.
Germany, Britain, Sweden, and France) and the United States. They offer a
wide range of car types and specifications: from economical compacts to the
more classy sports cars. These cars are available in the market as CBU or CKD
units.
The Japanese OEMs, according to the trend of vehicle sales (Total Industry
Volume – TIV) in the current and past years, have the largest share in foreign
OEMs’ TIV. The top three Japanese OEMs in Malaysia comprise Toyota, Honda
and Nissan, with total sales of 129,040 units in 2007, which is equivalent to
26.4% of the total TIV, or 69% of all foreign OEMs’ TIV for that year. The
other Asian OEMs, namely Daihatsu, Mitsubishi, Hyundai and Kia, have
recorded sales less than 1% each in 2007 (Lily Amelia et al. 2009).
The European OEMs, on the other hand, typically offer the high-end car
segment to customers, with cars that are usually priced at over the 100,000
ringgit9 line and some models are worth even more than one million ringgit per
unit. The popular makes, among others, include Mercedes, BMW, Volkswagen,
Volvo, MINI, and Porsche.
4.2.2. Local OEMs
Bloomfield (1978), as quoted in a study by Andrew and Shobhana (1989), has
suggested that the automotive industry of any country that originally does not
produce vehicles will go through the following stages:
1) import of CBU; to
2) assembly of CKD; to
3) assembly of CKD with certain percentage of locally produced parts (local
content); and finally to
4) producing full local manufactured unit (FLM).
9
10
Ringgit is the Malaysian currency with the currency code MYR.
MRev 02/2012
This progression will contribute to the country’s economy, by:
i.
creating employment;
ii.
making savings in foreign exchange;
iii. stimulating local investment and creating many tiers of business (including
SMEs); and
iv. enriching local professionals mainly in automotive technologies.
Andrew and Shobhana (1989) also stated that the automotive industry in the
ASEAN10 region has closely conformed to the scheme that Bloomfield has
mentioned. This fact is proven true for Malaysia, whereby the nation’s first
OEM—Proton—has successfully gone through all the above mentioned stages
after some years of operation. Proton has started in the early eighties through a
partnership with the Japanese subsidiaries, Mitsubishi Corporation (MC) and
Mitsubishi Motor Corporation (MMC) (Mohd Rosli 2006). Proton’s first car
had adopted an established model but later has included locally manufactured
parts in the car and the subsequent models. Today, Proton is a producer of
FLM models such as Gen-2, Persona and Exora11. Besides Proton, Malaysia has
also two other major passenger car manufacturers—Perodua and Naza. They are
still in the second (CKD) or third stage (CKD with local content) in terms of
car production stage as mentioned by Bloomfield (1978). For instance, Perodua
has launched its MPV (Alza) in 2009 with nearly 90% of its component locally
made; thus regarded as the “most Malaysian Perodua to date” (Lester Kong
2009).
4.2.3. Used car market
As mentioned previously, the used cars in Malaysia can be either local used
units or imported refurbished units. Local used units are cars that are sold
by the owners (may not necessarily be the first owner) by their own effort or
through used-car dealers. The used car market ranges from relatively new units
(based on the year of ownership; or interchangeably the date of registration) to
cars that are supposed to be retired.
The market of used car in 2006, as estimated by the Used Car Dealers
Association, was roughly 250,000 units (MITI 2007). Furthermore, from the
latest report, the Federation of Motor and Credit Companies Association of
10
11
Association of Southeast Asian Nations.
Proton Exora is claimed to be the first ever MPV to be fully developed in the country (Aqbal Hafeez et al. 2009).
11
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Malaysia (FMCCAM) estimated12 that the size of the used car market would
reach 600,000 units in 2010, as compared to 480,000 units in 2009 (David Tan
2010).
On the other hand, from the Road Transport Department’s (RTD) record, the
used car trade is believed to be one of the major contributors to approximately
1.3 million applications of vehicle ownership transfer every year (PMR 2009).
Therefore, the estimation made by FMCCAM is well within the RTD’s figure.
However, there is no information on the market size of local used units against
the imported ones.
4.3. Purchasing Scheme
Cars are usually purchased on credit rather than cash (Banking Info 2010).
For the most popular credit purchasing, or the hire-purchase scheme (HP), the
banking institutions will usually be the financiers to the loan. The period of
repayment (instalment) could be up to nine years or 108 months. The current
practice allows ownership for both new and used cars through the HP scheme,
provided that the car owner (hirer) meets all HP requirements (Banking Info
2010).
4.4. Ownership Cost
Car ownership cost is defined by two primary concerns: fixed cost and variable
cost. Fixed cost for car ownership is defined as the actual price and associated
taxes in a purchase such as insurance, road tax and licensing fees. Variable
cost is related to costs incurred during the ownership of the car such as fuel,
maintenance, parking, toll fees and other road use charges.
Therefore, car owners, in the period of ownership, should allocate a considerable
portion of their income for all of these expenditures (Table 1).
12
12
Volume is determined by rough estimate due to unavailability of a proper monitoring system.
MRev 02/2012
Table 1 Ownership cost
Type of cost
Trip
cost
Legal
cost
Risk
cost
Aftermarket
cost
Item
Fixed or variable?
• Fuel
Variable
• Toll
Variable
• Parking
Variable
• Roadtax(LKM)
Fixed; per annum
• Drivinglicense(CDL)
Fixed; per annum
• Trafficviolation
Variable (to users); fixed per offense
• Parkingviolation
Variable (to users); fixed per offense
• Insurance(Car/specificpart)
Fixed13; per annum
• Maintenance(preventive,
corrective, predictive)
Variable
• Retrofitting (for performance and/
Variable
or aesthetical value)
4.4.1. Trip cost
The trip costs, which include fuel and toll, enable a car to make trips on the
road. In Malaysia, the price of fuel is set to a nationwide standard price by
virtue of subsidisation by the government14. Also, car owners have to pay tolls if
they opt for tolled roads to avoid severe traffic congestion and to reduce travel
time; and this is common for major city residents especially in the area of Klang
Valley. Furthermore, drivers are charged for parking space in most cities/towns
either by the local authorities or privately-owned parking lot operators.
4.4.2. Legal cost
The Road Transport Department (RTD) is the regulatory body for road
transportations and is also responsible for the issuance of driving license
(Competence Driving License – CDL) and motor vehicle license (Lesen
Kenderaan Motor – LKM). Both CDL and LKM are subject to a renewal
process after a specified period, namely on semi-annual or yearly basis, only
if both the driver and vehicle are clear from any legal charges. Also, from the
users’ perspective, additional costs are expected if they commit traffic or parking
violations. Tickets for both types of offenses are normally issued by the traffic
13
14
Insured value will be discounted if one is eligible for No Claims Discount (NCD)/No Claims Bonus (NCB)
(Malaysia Insurance Online 2010).
Subsidisation of fuel in the recent years has been reviewed several times due to the unstable global oil
price; the latest measure is the differentiation between RON 95 and RON 97 petrol, with the price of RON
97 is set to float according to the latest global oil price.
13
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police (RMP15), RTDs or local authorities’ enforcement officers. The CDL,
LKM and traffic/parking fines are the examples of legal costs that car owners
have to bear (or forfeit) during the period of ownership.
4.4.3. Risk cost
The risk cost means the cost of insurance that car owners have to bear every
year according to the scheme offered by the insurer. The cost of insurance will
be determined primarily from the current value of a car (insured value), and this
cost will decrease as the car value depreciates over the ownership years. On top
of that, the cost will be further reduced if one is eligible for No Claims Discount
(NCD) over each policy renewal.
4.4.4. Aftermarket cost
The aftermarket costs consist of the cost for maintenance and retrofitting work.
Maintenance, as explained earlier, includes preventive (PM), corrective (CM)
and predictive (PdM).
Furthermore, the aftermarket items—in terms of parts, subsystems, or systems—
come from the “new supply” and the “second-hand supply”. The new items
supply can be sourced from either the Original Equipment Manufacturers16
(OEM) or Non-OEM; and they are further categorised into “locally produced”
or “imported” items.
The OEMs of automotive parts are also being referred to as Replacement
Equipment Manufacturers (REMs). They produce parts that are approved by
the authorities (according to any/several standards) or parts that are approved
by the car maker themselves (official product but not necessarily approved
per locally recognised standard; “manufacturer standard”). However, the new
supplies may also include substandard or fake items due to lack of control in
the market.
15
16
14
The Royal Malaysia Police or Polis Diraja Malaysia.
OEMs for parts/subsystems/systems should be distinguished from OEMs for car for the reason that the
latter produce car as a unit under its own brand name.
MRev 02/2012
On the other hand, car owners might also be interested in amending or adding
some aesthetic modification to their cars (such as new body paint and skirting)
as well as altering the default specifications (engine capacity, exhaust pipe,
suspension system, tyre and rim). These retrofitting works will increase the cost
of ownership.
The second-hand supply can also be divided into local or imported supply. The
local supplies include the parts obtained from car users (e.g. trade-in activities),
vehicle theft, cars that were involved in road accidents (MVA; especially in “total
loss”17 cases), confiscated cars due to legal action, and cars that are “forced” to
be retired (not roadworthy).
The imported second-hand supplies are usually sourced from “half-cut” shops18.
“Half-cut” refers to cars being cut into halves for the purpose of car parts salvage.
For example, one may ask for certain parts from the half-unit (e.g. front-end
consists of engine, radiator, transmission unit; rear-end consist of fuel tank, fuel
pump, part of the exhaust system), or may buy the whole half-unit.
4.4.5. Car ownership overview – Cost and maintenance
Figure 4 gives a bigger picture of car ownership costs and the maintenance
supply as explained in the previous sections.
For some reasons, cars that are supposed to be retired are not only being made
the source of local second-hand spare parts but are also made available as used
cars (shown in Figure 4). This unscrupulous and dangerous practice is done by
connecting up two halves of a certain model19 (e.g. from total loss unit, or stolen
car, or a combination of both) to be sold again with proper documentation (e.g.
Foong Pek Yee et al. 2007).
17
18
19
Destruction of an asset or property to the extent that nothing of value is left, and the item cannot be
repaired or rebuilt to its pre-destruction state. Some types of insurance policies pay the maximum
covered amount only in cases of total loss (Source: http://www.businessdictionary.com/definition/totalloss.html)
Also known to locals as “kedai potong”.
Known to locals as “kereta potong/kereta sambung”.
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Source of vehicle
Vehicle ownership
Purchasing scheme:
• Cash
• Credit
(Hire-purchase)
Trip cost:
• Fuel
• Toll
• Parking
Trip cost:
• Insurance
New supply:
• Part-subsystem-system:
- Approved/Official
- Substandard/Fake
Imported secondhand
supply
Legal cost:
• Road tax
• Inspection
• License
• Traffic
violation
Aftermarket cost:
• Maintenance:
- Preventive
- Corrective
- Predictive
• Retrofitting
Reasons for
retirement
Not roadworthy
MVA
Legal action
Vehicle theft
Secondhand supply
Part-subsystem-system
Local secondhand
supply
Figure 4 Ownership costs and maintenance supply
4.5. Vehicle End-of-Life (ELV)
The End-of-Life Vehicle (ELV) Directive is the European Union’s effort to
ensure that the disposal of vehicles that reach their end of useful life will be
optimised. In the European Union alone, it is estimated that between 8 and 9
million tonnes of waste are sourced from ELV (European Commission 2010).
The directive objectives are:
i. to ensure that vehicle dismantling and recycling are more environmentally
friendly;
ii. to clearly quantify the targets for reuse, recycling and recovery of vehicles
and their components; and
iii. to push producers to manufacture vehicles with recyclability plan.
In developed countries, certain amounts (by weight) of ELVs are recovered
such as 75% in the United States, and more than 80% in certain countries
16
MRev 02/2012
in Europe. Proper ELV plan may help in ensuring sustainable environmental
control through recycling and reuse. It could also help the maintenance of a car
by reusing the parts and components that passed quality control so that they
will be sold reasonably cheaper than new items.
However, Malaysia has not yet established any directive or legislation that is
related to ELV to date, and the motivation among the automotive companies
to benefit from the reuse of automotive components is rather low (Lily Amelia
et al. 2009).
4.6. The Automotive Ecosystem
The automotive ecosystem according to the “life cycle of products” involves the
industry and the users. Cars are transferred to car owners via the purchasing
scheme and will supposedly return to the industry at the stage of disposal—
ELV. Car owners have the options between new and used cars, as well as the
status carried by the car—FLM, CKD or CBU for new units, or local/imported
refurbished for used units.
Car owners are supposed to bear certain costs during the period of ownership
i.e. trip, legal, risk and aftermarket costs. With regard to maintenance, let
alone the retrofitting option, car owners have the freedom to choose among
the sources available in the current ecosystem. Figure 5 depicts the automotive
ecosystem in Malaysia, with the focus of discussion being the car ownership
duration (user).
17
Figure 5 Automotive ecosystem in Malaysia
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18
5.
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Car Maintenance Issues with Regard to
Users
There are various reasons that may affect car maintenance attitude among the
users. The problems may start at the beginning of car ownership, namely in the
stage of choosing which car to be bought. The decision is very important since
it will be reflected in the ownership period, and will substantially affect the cost
of car maintenance.
This section will further discuss the issues of car maintenance in three main
areas:
i. cost – car users’ economic factors;
ii. supply – availability of inappropriate automotive parts resources; and
iii. knowledge – car users’ knowledge and awareness.
5.1. Car Users’ Economic Factors
5.1.1. Choice of car in the market
The cost of ownership, as depicted in the automotive ecosystem (Figure 5),
starts at the users’ decision to purchase cars. The questions are:
• Do they buy the “right” car?
• Aretheyfinanciallyabletocomfortablyaffordtheircarownershipcosts?
The choice of vehicle will determine the amount of money one spends in
the ownership period as mentioned earlier—in terms of trip, legal, risk and
aftermarket costs. For example, an imported CBU car will cost more than
a CKD or FLM unit—of the same car segment and engine capacity—due to
differences in automotive tariff; and this will further determine the costs
for monthly instalment (for hire-purchase), insurance (value insured) and
maintenance costs (imported parts).
19
MRev 02/2012
5.1.2. Cost of maintenance services
Car owners’ attitude towards maintenance can also be seen in their choice
of maintenance services. Usually, car makers offer product warranty which
includes the element of maintenance benefits (usually preventive and corrective)
for certain kilometre-age or period of ownership (whichever comes first). Car
owners, however, have to follow certain rules and conditions such as performing
maintenance at the certified outlets20 to qualify themselves for the warranty
scheme.
Car owners will probably conform to the schedule of preventive maintenance
provided by the car makers during the warranty period; however, they may not
do so when the warranty period ends. The question is:
• Where do the owners perform maintenance work after the warranty
period ends?
i. Due to financial constraints and the search for more “flexibility”,
they perhaps opt for other workshops. They will have more options in
acquiring parts in terms of the parts’ status (new or used; approved/
official or substandard/fake) and bargaining the labour cost.
ii. Car owners may also perform basic maintenance themselves (DIY),
or by hiring non-professional labour (e.g. relatives; friends) at possibly
nominal or no cost.
5.2. The Availability of Inappropriate Automotive Parts
Resources
5.2.1. What the market has to offer
With regard to the acquisition of car parts, subsystems or a full system, car
owners have the options between new and second-hand items, as well as between
approved/official and substandard/fake new items. Due to the lack of control
in the market, car owners will look for a better deal in terms of cost although at
the same time they are compromising quality and safety such as by buying parts
from “half-cut” shops.
Atofficialservicecentres,orauthorisedworkshopsknownas“wakilservis”.
20
20
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5.2.2. Substandard/fake products
Car owners also could be the victim of substandard or fake products such
as engine lubricant (e.g. Harian Metro 2010), engine oil filter, and brake
a
components (e.g. BERNAMA 2009; Minderjeet Kaur 2009).
There are however car owners who do care about the quality of products
butare “unintentionally” involved in using substandard or fake products
due to fraudulent mechanics/service providers and/or lack of knowledge in
identifying or distinguishing labels and/or specifications.
5.2.3. Less popular and aged/antique cars
Some of the parts/subsystems/systems for certain cars are not widely available in
the market; and this usually affects less popular models especially CBU cars and
old models/antique cars (e.g. BERNAMAb 2009). This is one of the factors that
help sustain the half-cut enterprises. The high demand for parts/subsystems/
systems for this group of cars also increases the propensity of vehicle theft (such
as in Australia, as mentioned in NMVTRC (2002)).
5.3. Car Users’ Knowledge and Awareness
Poor maintenance attitude may also be caused by lack of related knowledge,
which includes general knowledge of automotive (basic vehicle operations) as
well as the specific needs of a particular car.
For that reason, car owners may experience the following disadvantages, namely:
i. the inability to perform self-assessment on their cars;
ii. falling victim to irresponsible mechanics at service centres/workshops
such as buying fake items, being charged unreasonably, etc;
iii. failure to make the right decisions for maintenance work, especially in the
case of a major breakdown; and
iv. failure to appreciate the importance of maintenance quality/professional
maintenance work.
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6.
Challenges: NAP vs. Status Quo
It is clear that the National Automotive Policy (NAP) has been introduced mainly
to strengthen the automotive industry in many aspects. In the currently reviewed
NAP, there are 18 measures that are divided into seven segments as described
in Table 2 (Refer Appendix C for NAP details as per MITI’s Media Release—
MITI (2009)). Meanwhile, Figure 6 shows the mapping of NAP measures on
Malaysia’s automotive ecosystem as discussed in the previous section (based
on Figure 5). However, the introduction of the end-of-life vehicle (ELV) policy
(measure No. 15 in Segment E – Table 2) received intense rejection by the
public upon the announcement of the reviewed NAP and thus it has been
taken off from the framework (perhaps until a more viable measure for ELV is
proposed). Furthermore, the two other NAP measures – No. 2 (Segment A) and
No. 13 (Segment E) in Table 2 – are directly related to Heavy Goods Vehicles
(HGVs) concerns.
Table 2 Measures in National Automotive Policy (Rearranged/reformatted from: MITI 2009)
No.
Policy measures
Responsible
agency/ministry
A. MANUFACTURING LICENCE: PROMOTING HIGH IMPACT SEGMENTS
1
Freeze on issuance of new ML will be lifted for certain segments – effective 1 MITI/MIDA/
January 2010.
MATRADE21
2
The freeze on ML for reconditioning and reassembling (rebuilt) activities is
maintained.
-
B. TAX/DUTY: PROMOTION OF EXPORTS OF VALUE ADDED PRODUCTS
3
Tax exemption on the value of increased exports of vehicles and parts/
MOF22
components – effective 1 January 2010.
4
Import duty: removal/reduction in compliance with trade agreements.
5
Import and excise duties for Complete Built-Up (CBU) and Complete KnockedDown (CKD) units are maintained.
6
Gazetted price of imported used vehicles to be addressed under declaration MOF/MITI/
– effective 1 January 2010.
Customs23
MITI
-
C. TECHNOLOGY: PROMOTING HIGH VALUE AND GREEN TECHNOLOGY
7
Better incentive for critical and high value-added parts and components
MOF/MITI/MOT
production – effective 1 January 2010.
8
Promotion of hybrid and electric vehicles and development of related
infrastructure – effective 1 January 2010 to be commenced.
MOF/MOT/
RTD/KeTTHA24
(continue)
Malaysian External Trade Development Corporation.
Ministry of Finance or Kementerian Kewangan.
OfficiallyknownasRoyalMalaysianCustomsorJabatan Kastam Diraja Malaysia (JKDM).
24
Kementerian Tenaga, Teknologi Hijau dan Air or Ministry of Energy, Green Technology and Water.
21
22
23
22
No.
Policy measures
MRev 02/2012
Responsible
agency/ministry
D. SOFT LOANS/GRANTS: MEASURES TO ENHANCE COMPETITIVENESS OF PARTS/COMPONENTS
MANUFACTURERS
Soft loans/grants – continuation of Automotive Development Fund (ADF)
MITI/MOF
and Industrial Adjustment Fund (IAF).
9
E. STANDARDS: EFFORTS FOR INCREASED SAFETY
10
Full implementation of Vehicle Type Approval (VTA) – 10th Malaysia Plan.
MOT/RTD
11
Gradual introduction and enforcement of mandatory standards for parts MOSTI/MOT/
and components.
KPDNKK
12
Gradual phasing-out of imported used parts and components – effective
MITI/MOT
June 2011.
13
Gradual phasing-out of imported used commercial vehicles.
MITI/MOF/Customs
14
Clear roadmap for the implementation of fuel standards.
NRE25
15
Gradual introduction of end-of-life vehicle (ELV) policy. (Dropped)
MOT/RTD
F. THE APPROVED PERMIT SYSTEM
16
Termination of: Open AP system – 31 December 2015; Franchise AP – 31
MITI
December 2010.
17
Establishment of Bumiputera Automotive Fund – effective 1 January 2010.
MOF/MITI/Customs
G. THE NATIONAL DIMENSION: A STRATEGIC PARTNERSHIP FOR PROTON
18
A new strategic partnership between Proton and a globally established
MITI
OEM.
6.1. A Look into “Segment E: Efforts for Increased Safety”
in NAP
Car maintenance issues that have been discussed in this report are mainly
related to measure No. 12 of Segment E in NAP—“Gradual phasing-out of
imported used parts and components”—which is scheduled to be effective June
2011. What can be learned from this measure is that it will progressively prevent
the supply of imported used/second-hand parts supply into the market (refer to
Figure 5 or Figure 6) and thwart car users from opting what to them is one of
their “economic” maintenance options. On the other hand, with regard to the
industry, this measure can also be seen as a “booster” to catalyse high domestic
demand of aftermarket products.
Nevertheless, there are several concerns that can be derived with regard to
measure No. 12.
i. Based on the mapping of NAP measures in Malaysia’s automotive
ecosystem with regard to maintenance work (Figure 6), the used or second25
Ministry of Natural Resources and Environment or Kementerian Sumber Asli dan Alam Sekitar.
23
Figure 6 Mapping of NAP measures in Malaysia’s automotive ecosystem (Refer to Table 2 for full details of NAP measures)
MRev 02/2012
24
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hand parts/subsystems/systems may also be sourced locally as explained
earlier—from users (e.g. trade-in activities), vehicle theft, items salvaged
from cars involved in road accidents, cars that are confiscated due to legal
action, and retired cars. Therefore, in the view of car maintenance attitude
towards safety, this measure only prevents the importation of used parts.
ii.
Without imported supply, it is expected that the demand for local used
supply will rise since there should be a group of users who are still looking
for this more economical option. Also, in connection with cheap parts, car
users may also look for substandard/fake aftermarket products.
iii. A worse situation is that cases of vehicle theft may increase especially when
the price of approved/official parts is relatively high.
6.2. Challenges Waiting for the Implementation of
“Used Parts Measure” in NAP
Based on the abovementioned concerns, the implementation of this measure
will face significant hurdles not only in the industry but also to the objective of
making the automotive consumerism “healthier”.
6.2.1. Car ownership costing – Economic burden
Due to the importance of car ownership to the transport industry, environment,
health and economic growth, car ownership costing has always been subjected
to intense research in other countries over many years. Early research on car
ownership dealt with car ownership at national, regional and local levels.
Next, the area of study is expanded to how car ownership is affecting the socioeconomy of the society particularly the household income. The most recent
study on car ownership dealt with the influence of consumer attitudes and
lifestyles on their choice of car type.
• Ifthenewregulationisimplemented,willthisincreasethecostofcar
ownership to the society?
25
MRev 02/2012
As explained previously, measure No. 12 will ultimately put an end to one of
the used part supplyies to the users. However, there is no guarantee that the
price of local new parts (in the case of approved or official parts only) will be
within a reasonable or affordable range due to many factors such as the volume
needed to bring down the market price (economies of scale). If that is the case,
users will still presumably favour the other economical maintenance options,
local second-hand parts as well as substandard/fake items in the market. Thus,
this will benefit neither the industry nor the users.
However, there is no specific study that explains the price of new parts
especially those produced locally, in that whether they are priced according to
an acceptable margin or being speculated at the end of the market chain (to
users) by virtue of the “cheap” option provided by the imported used supply.
6.2.2. The status quo of the automotive ecosystem as a barrier
In terms of market attraction, the automotive ecosystem in the country today
can also be viewed as the barrier towards encouraging best maintenance attitude
among the users. First of all, the price of cars in the market may be one of
the major influencing factors e.g. the price of cars is disproportionately higher
than the income level and cost of living. Consequently, a majority of car users
buy their cars through the hire-purchase scheme and perhaps a considerable
portion of them opt for a long repayment period e.g. up to nine years. If that
is the case, the age of the car at the end of the HP contract will be at the ELV
stage.
Furthermore, this factor will also deter users from acquiring new cars due to
the long repayment period as well as significant depreciation of the car value.
This will force them to keep their cars longer than they should that presumably
require a lot of maintenance work at the latter stage of the HP contract.
Furthermore, the current ecosystem also allows refurbished cars to be imported
from other countries and still they are usually priced considerably high (refer
Section 4.2). If one buys this type of car using the higher purchase scheme, there
will be a high chance that the owner will keep a car that is more than 10 years
26
MRev 02/2012
of age (years of ownership at the origin country plus the local usage period);
and thus promote this “unhealthy” trend of car ownership. Nevertheless, this
business approach is scheduled to be terminated in 2015 according to the new
policies in NAP (measure No. 16 in Segment F – Table 2).
6.2.3. The seemingly incomplete loop
The currently reviewed NAP really needs the support at the end of the cars’ life
cycle, which is the establishment of ELV directive and policies in the country.
Through a proper ELV framework, both the industry and users can benefit
from the three R’s—reuse,recycleand recovery. A viable and successful ELV
initiative will not only solve car maintenance issues with regards to used parts
(reliance on heavy maintenance works) but will also benefit the industry in
terms of the users’ inclination to buy new cars.
6.2.4. Concerted effort among the government agencies
The other challenge faced in the implementation of NAP, which is spearheaded
by MITI, is the organisation and commitment of the other government
ministries and their agencies.
In total, there are seven ministries (including MITI) and their agencies that are
involved in making the currently reviewed NAP a success:
i. MITI (MAI, MIDA, MATRADE);
ii. MOF (Customs);
iii. MOT (RTD, JKJR26, MIROS);
iv. MOSTI;
v. KPDNKK (MDTCC)
vi. NRE; and
vii. KeTTHA.
26
Jabatan Keselamatan Jalan Raya or Road Safety Department.
27
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6.3. Future Research
To date, there has been no local study that looks into the causal effect of
car ownership costs to economic burden. A study by Dargay (2002) however
had sought to examine the factors determining car ownership pattern for
households in rural and urban areas. The result suggests that general increases
in the costs of car ownership would pose a considerable economic burden
for rural households i.e. car dependency by rural households due to the lack
of public transportation in the rural areas—which may not be true for some
countries such as Malaysia.
From another perspective, users can also be categorised according to their
financial strength since this factor affects their attitude towards car maintenance
to a large degree. Those who cannot afford approved/official parts will always
be “forced” to purchase substandard/fake new items or second-hand parts.
Nevertheless, more research needs to be undertaken in order to explain both
the rural and urban user issues as well as the attitude of maintenance among
the users according to their financial ability and car ownership pattern among
the households. Furthermore, studies must be also focused on the social effects
if the implementation of measure No. 12 manages to reach its peak i.e. blanket
ban to all used parts importation.
Last but not the least, a comprehensive study on the affected industry also need
to be done in order to explain how big is the business in terms of its revenue
(imported used parts and the entire used parts business), and to the existing
labour force related to the business; its skilled and semi-skilled workers.
7.
Conclusion and Recommendation
This review has gone through the life cycle of a car from the source (industry)
to the usage stage (car ownership) and finally at the supposedly available ELV
initiatives. This review has also looked into the main focus of the discussion;
28
MRev 02/2012
vehicle maintenance issues that have been narrowed down to only those related
to cars, and its relation to one of the NAP measures—the gradual phasing out
of imported used parts and components. Referring to the discussion of car
maintenance issues as well as the whole automotive ecosystem (Figure 5 and
Figure 6), the introduced measures in NAP will face stern drawbacks if not
properly executed. Thus, a “win-win” situation must be created between the
industry and most importantly, the users.
Additionally, the relevant parties should think about the formula to ease the
burden of car ownership that includes the price of cars (local or imported),
price of automotive parts and other related costs. Presumably, the attitude
among car owners regarding vehicle maintenance is highly influenced by their
financial strength as well as their location (urban or rural). A proper framework
in executing the NAP measures i.e. based on the economic/industry, society,
and enforcement strategies will in the end, benefit both the industry and the
users.
Last but not least, more efforts also need to be undertaken to educate car owners
and increase their knowledge and awareness on the best car maintenance
practices.
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MRev 02/2012
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Aqbal Hafeez A, Zulhaidi MJ, Yahaya A, Mohd Syazwan S & Fazli Y (2009),
Malaysian vehicle assessment programme: PROTON EXORA – a 4-Star MPV
in safety, MER 09/2009, Kuala Lumpur: Malaysian Institute of Road Safety
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Banking Info (2010), Hire purchase, Accessed in June 2010, from http://www.
bankinginfo.com.my/_system/media/downloadables/ hire_purchase.pdf.
a
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b
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30
MRev 02/2012
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nation/17645536&sec=nation.
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Paper/ROAD%20MANAGEMENT%20AND%20MAINTENANCE2.
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33
MRev 02/2012
Appendix A
Table A1 Objectives of National Automotive (NAP) Policy (Prime Minister’s Department 2005)
NAP Objectives
1
To promote a competitive and viable automotive sector, in particular national car
manufacturers.
2
To become a regional hub for manufacturing, assembly and distribution of automotive
vehicles.
3
To enhance value-added and local capabilities in the automotive sector.
4
To promote export-oriented Malaysian manufacturers as well as component and parts
vendors.
5
To promote competitive and broad-based Bumiputera participation in vehicle
manufacturing, distribution and importation as well as in component and parts
manufacturing.
Table A2 Objectives of National Automotive (NAP) Policy Review (MIDA 2010)
Reviewed NAP Objectives
34
1
Ensuring the orderly development as well as the long term competitiveness and
capability of the domestic automotive industry as a result of market liberalisation.
2
Creating conducive environment to attract new investments and expand existing
opportunities.
3
Enhancing the competitiveness of national car manufacturers through strategic
partnership.
4
Fostering the development of the latest and more sophisticated technology in the
domestic automotive industry.
5
Developing high value-added manufacturing activities in niche areas.
6
Enhancing Bumiputera participation in the domestic automotive industry.
7
Improving safety standards for consumers and promoting environment-friendly
opportunities.
8
Enhancing the implementation of current NAP policy instruments.
MRev 02/2012
Appendix B
Table B1 Vehicle types in EU directives (SWOV 2007)
Type
Designed to transport
Mass
Motor vehicle type
M1
Max. 9 people
≤ 3,500 kg
Car
M2
More than 9 people
≤ 5,000 kg
Minibus
M3
More than 9 people
> 5,000 kg
Bus
N1
Freight
≤ 3,500 kg
Van
N2
Freight
3,500–12,000 kg
Light lorry
N3
Freight
> 12,000 kg
Heavy lorry
Others:
L
Motor vehicles with two or three wheels.
T
Tractors in agriculture and forestry; some are permitted to be on the road.
O
Trailers and semi-trailers.
35
MRev 02/2012
Appendix C
NEWPOLICIESANDMEASURESINTHENAP
REVIEW
(Rearranged/reformatted from: MITI (2009))
Several new policies and measures, covering licensing, duties, incentives,
technology, environment, safety, standards and regulations are being introduced
under the NAP review, with the aim of fostering a more competitive industry
and freer market. The new policies include the following.
A. MANUFACTURINGLICENCE:PROMOTINGHIGH
IMPACTSEGMENTS
The current freeze on issuance of new Manufacturing Licence (ML) will be
lifted for several industry segments which are considered strategic and have a
high impact on Malaysia’s economy. This liberalisation will be instrumental in
producing higher margins, business-related vehicles, and more environmentfriendly vehicles.
Current measures:
• Freeze on new ML due to excess capacity.
• Vehicle assemblers are allowed to make available their excess capacity to
third parties (contract assembly) to assemble new makes or models on the
condition that the models do not directly compete with those produced by
national car manufacturers.
New measures:
• Specifically, the new policy will lift the freeze of new ML on:
 luxury passenger vehicles with engine capacity of 1,800 c.c and above
and on-the-road price of no less than RM150,000;
 pick-up trucks and commercial vehicles;
 hybrid and electric vehicles; and
 motorcycles with engine capacity of 200 c.c and above.
• TherewillbenoequityconditionsimposedonML.
36
MRev 02/2012
• Thecurrentpolicyoncontractassemblyisbeingmaintainedtoencourage
utilisation of existing excess capacity.
• ThecurrentpolicyonthefreezeofMLforreconditioningandreassembling
(rebuilding) activities is maintained.
B. TAX/DUTY:PROMOTIONOFEXPORTSOFVALUE
ADDEDPRODUCTS
I.
Tax Exemption on the Value of Increased Exports of Vehicles and
Parts/Components
The NAP Review introduces substantially higher tax exemptions for exported
goods with a significant portion of value added in Malaysia. This reflects the
country’s goal to expand the amount and quality of exports. A tax exemption
on statutory income for all sectors is offered based on the percentage increase
in its value added.
Current measures:
• Tax exemption on statutory income for all sectors is given based on
percentage increase in the value of exports provided the products attain
the following value-added criteria:
 10% of the value of increased exports is given to manufacturers
provided the goods attain at least 30% value added; and
 15% of the value of increased exports is given to manufacturers
provided the goods attain at least 50% value added.
New measures:
• The tax exemption on statutory income for manufacturers in the automotive
industry is enhanced:
 From 10 to 30% of the value of increased exports, provided the goods
attain at least 30% value added; and
 From 15 to 50% of the value of increased exports provided that the
goods attain at least 50% value added.
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MRev 02/2012
II. Import Duty: Removal/Reduction in Compliance with Trade
Agreements
It is MITI’s priority to promote free and prosperous international trade.
Under the Free Trade Agreements (FTAs), Malaysia is committed to gradually
remove or reduce its import duty. The automotive sector will meet the national
commitment to the various FTAs.
III. Import and Excise Duty for Complete Built-Up (CBU) and
Complete Knocked-Down (CKD)
The rates of import duty (Most Favoured Nation – MFN) and excise duty for
CBU and CKD vehicles are maintained.
IV. Gazette Price of Imported Used Vehicles to Address under
Declaration
Currently, only the price for new imported CBU motor vehicles is gazetted for
the purpose of duty computation. The NAP Review will establish the gazette
price for imported used CBU motor vehicles as well.
C. TECHNOLOGY:PROMOTINGHIGHVALUEAND
GREENTECHNOLOGY
I. Better Incentives for Critical and High Value-added Parts and
Components Production
Promoting the production of critical and high value-added parts and components
is a crucial scheme to increase the country’s human and technological capital
and contribute to long-term development goals. Companies manufacturing
transmission systems, brake systems, airbag systems and steering systems
are eligible for better fiscal incentives i.e. Pioneer Status (PS) of 100% fiscal
deduction for 10 years or Investment Tax Allowance (ITA) of 100% for five
years.
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MRev 02/2012
II. PromoteHybridandElectricVehiclesandDevelopmentofRelated
Infrastructure
Investing in the development of hybrid and electric vehicles bears the benefits
of the acquisition of new, high end technology and the promotion of a more
sustainable energy policy. A comprehensive mix of fiscal incentives, duty
exemptions and customised training and R&D grants was included in the NAP
Review to maximise returns on investment.
Current measures:
Under the 2009 Budget, imports of CBU hybrid cars are:
• Exempted from import duty; and
• Granted 50% excise duty exemption.
Both exemptions are given for a period of two years until 31 December 2010 to
promote assembly that is done locally.
Currently, the infrastructure for electric vehicles is not available in the country.
New measures:
• Investments in the assembly or manufacture of hybrid and electric vehicles
will be granted:
 100% ITA or PS for a period of 10 years;
 Customised training and R&D grants in addition to the existing grants;
 50% exemption on excise duty for locally assembled/manufactured
vehicles or provision of grant under the Industrial Adjustment Fund (IAF);
 PS of 100% for 10 years or ITA of 100% for five years for manufacture
of selected critical components supporting hybrid and electric vehicles,
such as:
i. electric motors;
ii. electric batteries;
iii. battery management system;
iv. inverters;
v. electric air conditioning; and
vi. air compressors;
 Additional attractive, customised incentives will be considered based
on proposed activities.
• The Ministry of Energy, Green Technology and Water will draw up a
roadmap to develop the infrastructure for electric vehicles.
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MRev 02/2012
D. SOFTLOANS/GRANTS:MEASURESTOENHANCE
COMPETITIVENESS OF PARTS/COMPONENTS
MANUFACTURERS
To improve competitiveness of parts and component manufacturers and to
enhance their contribution to the automotive industry and economy, the
Automotive Development Fund (ADF) and Industrial Adjustment Fund (IAF)
will be continued.
E. STANDARDS:EFFORTSFORINCREASEDSAFETY
I.
Full Implementation of Vehicle Type Approval (VTA)
Under the current NAP, the Road Transport Department (RTD) was assigned
to implement the VTA project, which is yet to be established. Under the NAP
Review, the Ministry of Transport (MOT) will accord priority in the 10th
Malaysia Plan to the full establishment of the VTA standards and testing
facilities.
II. GradualIntroductionandEnforcementofMandatoryStandards
for Parts and Components
Due to the lack of a specific regulatory body responsible in enforcing standards,
there is insufficient coordination in the enforcement of mandatory requirements
for parts and components.
Under the NAP Review, the Ministry of Science, Technology and Innovation
will coordinate and formulate a roadmap for the introduction and enforcement
of mandatory standards for automotive products.
III. GradualPhase-outofImportedUsedPartsandComponents
Safety and environmental concerns rose from the practice of importing used
parts and components without any restrictions or mandatory tests. The NAP
Review is introducing a mechanism to prohibit imports of used parts and
components, effective from June 2011.
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MRev 02/2012
IV. GradualPhasingOutofImportedUsedCommercialVehicles
Currently, imports of used commercial vehicles are allowed. Under the new
policy, imports of used commercial vehicles will be prohibited, effective from 1
January 2016 in line with:
i. the gradual phasing out of the import of used parts/components; and
ii. the termination of the AP system for used vehicles.
V. Clear Roadmap for the Implementation of Fuel Standards
Since September 2009, EURO 2M specification for petrol and diesel has been
implemented. The government has now set a clear target of implementing
EURO 4M specification for petrol and diesel by 2011. The Ministry of Natural
Resources and Environment will establish a roadmap for fuel standards and
quality.
VI. GradualIntroductionofVehicleEndofLifePolicy
At present, there are 2.7 million passenger vehicles that are aged 10 years or
older on the road. Compared to other countries, Malaysia has a very low vehicle
scrap rate and relatively high average vehicle age.
As a first step towards the implementation of a full Vehicle End of Life
(ELV) Policy, the NAP Review introduces mandatory annual inspections as a
requirement for road tax renewal for all vehicles aged 15 years or older.
The Ministry of Transport will formulate a roadmap to reach the full
implementation of the ELV policy.
F. THEAPPROVEDPERMITSYSTEM
In line with Malaysia’s international commitments, the Open AP system will be
terminated by 31 December 2015, while Franchise AP will be phased out by 31
December 2020.
Effective 1 January 2010, a charge of RM10,000 for each unit of Open AP issued
will be imposed and the collection will be used to establish a fund to assist
Bumiputera companies venturing into the automotive and other businesses.
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MRev 02/2012
G. THENATIONALDIMENSION:ASTRATEGICPARTNERSHIP
FOR PROTON
A new strategic partnership between PROTON and a globally established Original Equipment
Manufacturer (OEM) will be established to enhance PROTON’s competitiveness in a global
market and its long term viability.
H. EFFECTIVEDATE
The new policies and measures will be effective from 1 January 2010.
42
Malaysian Institute of Road Safety Research
Lot 125-135, Jalan TKS 1, Taman Kajang Sentral
43000 Kajang, Selangor Darul Ehsan
Tel +603 8924 9200 Fax +603 8733 2005
Website www.miros.gov.my Email [email protected]
Designed by: Publications Unit, MIROS
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Review of the National Automotive Policy on Car

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