Why Malaysian cars are so expensive?

When I was working and studying in Canada in the mid 1970s, a brand new Canadian made car cost about C$8,000. The minimum wage then was C$4 per hour. I used to be paid C$7 per hour. In one day, a double shift would bring me C$100 or more. My university mate Desmond from South Africa bought a second hand car for C$500, and it served him well in those harsh winter conditions.

When I returned to Kuching in 1978, I could not afford a car on my monthly salary of RM500 a month. Then in 1982, when I was elected MP, I bought my first car, a Toyota Corolla 1.3 for RM18,000. The monthly repayment for the car loan was about RM200, hardly a burden on my take home pay of RM2,400 as a MP.

When I traded it in for a Nissan Sentra 1.6, it cost me RM36,000. It was still quite affordable.

After the appearance of our national car, the whole landscape has changed.

To make sure that Malaysians buy only national cars, the government practises a highly protectionist policy in the car industry. Foreign imported cars are charged with a very high tax levy of 150%, I think. The highly priced import Aps were given to connected companies and individuals only.

Without competition from freely imported cars, the car prices in Malaysia have rocketed sky high. We are now compelled to support a very inefficient company making and selling our national cars.

A few years ago, I went to Bangkok for a holiday. I was surprised to see that the use Toyota Camry cars for taxis. I asked the taxi driver how much did it cost for him to buy a new Camry. He said it cost him about B400,000 or RM40,000. It is cheap because it manufactured in Thailand.

What kind of luxury cars can you buy with RM40,000 in Malaysia?

Unfortunately in Malaysia, we must prove that Malaysia Boleh, so we must have our own national car, even though our national Proton cars are still based on the Mitsubishi model in Japan.

The public transport system is hardly systemic, so in large urban centres throughout Malaysia, a car has become a necessity in life. The end result is monstrous traffic congestion and horrendous air-pollution everywhere.

Then I came across a posting on the subject by Syed Akbar Ali in his blog Outsyed the Box. I have taken the liberty of producing his article below. I must remind readers between the income parity between USA and Malaysia. The per capita income for USA is USD36,000 while that for Malaysia is USD3,600 or so per annum.

There is one surefire method of increasing the average Malaysian’s monthly disposable income by 15% to 25% without the Government incurring a single sen in expenditure of taxpayer’s money or causing runaway inflation. This can be done before the next General Elections too. And that is by removing all import duties and restrictions on motorcars and vehicles and removing the redundant AP regime.

This will also immediately stop the ongoing impoverishment of a large number of Malay bumiputras caused by the high duties placed on motor vehicles. Malays make up by far the largest number of car buyers in the country today.

If this is done quickly enough, it will also ensure a win for the BN in the next General Elections. First lets look at some car prices.

BMW 535i sells for RM178,000 in the US

In the United States of America (a developed country which we are also aspiring to become by the year 2020) a 2009 model BMW 535i Sedan is selling for about USD50,367.00. This is only RM178,000 – about the price of a Toyota Camry 2.4L here in Malaysia. The same BMW sells in Malaysia for about RM450,000.

BMW 328i sells for RM155,000 in the US

The 2009 model BMW 328i 2 door Convertible sells for USD44,014 or RM155,369.00 in the US. In Malaysia the same car sells for over RM460,000. This is an untenable situation.

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Audi A4 2 Door 2.0T Cabriolet Convertible sells in the US for USD40,328.00

The 2009 model Audi A4 2 Door 2.0T Cabriolet Convertible sells in the US for USD40,328.00 or RM142,357. In Malaysia the same car would sell for about RM265,000.

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VW GTI 2.0T sells for RM85,000 in the US

In the US the 2009 model Volkswagen GTI 2.0T sells for USD 24,039 or RM85,000 only. In China the same car will cost around RM60,000. Over here the same VW car sells for about RM200,000.

And the 2010 model Toyota Camry 2.4L sells in the US for USD 19,659.00 or RM69,396 In Malaysia the 2008 Toyota Camry 2.4L sells for RM170,000.

Toyota Camry 2.4L, 2010 model. RM69,000 in the US

Car prices in Malaysia are about three times higher than the prices in the United States. We are a developing nation. Our land and labour costs are so much cheaper than the US. Why are our cars so expensive? It does not make any sense. Tak masuk akal.

Then here are some car prices from our neighbour Indonesia. The Toyota Altis sells in Indonesia for about RM46,000. The same car sells here for around RM 112,000. Again we are three times more expensive than Indonesia.

The Honda Jazz sells here for RM108,000. In Indonesia the Jazz sells for RM 36,000. Three times more expensive.

We are paying ridiculously high prices (and actually impoverishing the Malays – who are the largest buyers of cars in Malaysia) to support an out of date, out of touch with reality motor car policy.

We are paying the highest car prices in the world to support the Proton and other locally made cars as well as support a mind boggling AP policy which only benefits a relatively few rich Malays. A disproportionately large number of Malays and other Malaysians are being impoverished to subsidise the wealth of a few inefficient rich.

26 million Malaysians have to pay three times more for their cars just to support Proton and 120,000 people who are directly and indirectly involved in the motor sector in Malaysia and the AP holders. That is a ratio of 216:1.

This ratio of 216:1 is too skewed. 26.0 million happier people can contribute many more votes than 120,000 members of an inefficient motor industry. 26 million unhappy people can change a Government. (The maths is not really difficult here)

And this outdated policy is impoverishing the Malays more than anyone else.

Here is some news from our DPM Tan Sri Muhyudin Yassin about our car policy. This is truncated:

Muhyiddin assures govt support for automotive parts and component sector

1. KUALA LUMPUR, May 26 — The deputy prime minister said special focus will be given to “facilitate and encourage” the development of the automotive parts and component sector despite the current global and regional economic downturn.

2. “Under the CEPT and Asean Trade in Goods Agreements, Malaysia has agreed to eliminate import duties on all products in the Normal Track on January 1, 2010. This includes motor vehicles, auto parts and components,” he said.

3. He pointed out that . . . the motor vehicle sub sector in Malaysia will not be directly impacted because of its heavy dependence on the domestic market.

4. “The Malaysian government recognises the contribution of the domestic automotive industry towards the development of the country.”

Para 2 sounds promising but then Para 3 and 4 basically says that the Malaysian motor car industry will continue to be protected. This means we will continue paying the highest car prices in the world for automobiles.

” Cuba kita kira : kalau kereta Honda Jazz di jual dengan harga yang sebenarnya (lebih kurang RM36,000 saja) dan bukan pada harga sekarang (RM108,000) maksudnya bayaran bulanan pembeli kereta akan jadi kurang, mungkin sepertiga sahaja daripada bayaran bulanan sekarang.

Jika sekarang orang bayar RM1,500 sebulan untuk beli Honda Jazz, kalau harga kereta lebih menepati harga pasaran dunia, orang kita perlu bayar sekitar RM500 saja sebulan.

Maksudnya tanpa Kerajaan perlu membuat apa pun (merangsang ekonomi, belanja berpuluh billion Ringgit duit rakyat untuk stimulus dan sebagainya) setiap rakyat Malaysia yang membeli kereta yang seharga dengan Honda Jazz akan dapat menjimatkan sehingga RM1,000 sebulan daripada kos sara hidup bulanannya.”

This is like giving the car buyer an RM1000 pay rise without incurring any extra costs for the taxpayer, the Government or the economy. It will greatly reduce the cost of living in Malaysia and spur greater economic growth too.

Tapi sekarang, yang menjadi mangsa dulu dan yang menjadi miskin dulu orang Melayu juga. Orang Melayu yang paling ramai sekali menjadi pembeli kereta dalam negara kita. Orang Melayu kebanyakannya makan gaji – tiap bulan dapat gaji tetap. Bila harga kereta naik gila, yang menjadi miskin di saf depan sekali adalah orang Melayu juga.

In absolute numbers, the Malays are suffering the most because they are the most in number among the fixed income people who also buy cars.

Some folks said the other day that Proton has 150 major component suppliers, dealers, distributors and about 500 other parts suppliers too. Of the 150 major component suppliers, about 15 of them are listed companies. In total they employ about 120,000 people. The Proton supply chain is a mix of bumiputras and non bumiputras. But here is a sad fact : none of them are operating at their level best efficiency.

Our motor car policy is forcing Malaysians to subsidise Proton so that Proton can sustain major inefficiencies in the Malaysian economy. This is not a good thing at all.

We have to unwind this situation. Set a target of 18 months from now to unwind all protection for our motor industry. Remove the impoverishing AP policy also in 18 months. Let Malaysian car prices reflect world market prices for the same makes of cars.

If a BMW 535 sells for RM178,000 in America, it should sell for a little less here in Malaysia (our rentals and salaries are cheaper).

The Ministers continue making pronouncements about the car industry as though nothing has happened. I hope everyone will please wake up. The Government has a real chance of getting thrown out of office in about three years. The people will not accept inept answers anymore.

The ridiculous car prices in Malaysia is an issue that is just beginning to get more attention and publicity. It is going to become a really big issue in the near future. Be forewarned.