BN's First Broken Promise: No Cheaper Cars

Under pressure from the Pakatan Rakyat’s manifesto to reduce car excise duties by 20% annually to lower the cost of car ownership in Malaysia, BN had responded in their manifesto that they’ll do the same before the election.  UMNO President, Datuk Seri Najib Abdul Razak announced that if BN is returned to power, it will “revamp the National Automotive Policy to gradually reduce car prices by 20 to 30 per cent and increasing the competitiveness of the national cars.”

However yesterday, the Minister of International Trade and Industries, Dato’ Mustapa Mohamed, in charge of automotive policies formally announced that car prices will only be reduced after another 5 years and not in the near term.  In effect, the BN Government is telling Malaysians that they can stop dreaming of cheaper cars over the next 5 years, and if car prices were to drop at all, it’ll be after the 14th General Election.

The Minister gave the most beat-about-the-bush answer about how the Government was planning to reduce car prices by claiming that “prices will be reduced in accordance with market forces... with the move expected to enhance the competitiveness and productivity of industry players.”

What “market forces” are we talking about when the real reasons why our car prices in Malaysia are substantially higher than that of other countries are because Government taxes and protection for the inefficient local car companies!

If “market forces” could not bring down car prices over the past 20 years, we would like Dato’ Mustapa Mohamed to explain in detail, exactly why Malaysians should believe him that in the next five years, these same “market forces” will suddenly be able to result in a 20% to 30% drop in prices after 5 years.

Dato’ Mustapa also tried to deflect the issue by warning that “reducing excise duty and car prices in one go would have a serious impact on the industry, which offers 200,000 job opportunities, and could lead to closure of businesses.”  Mustapa also stressed that it would be difficult to sell new cars as the prices of second-hand cars would also drop.

Dato’ Mustapa’s arguments are completely flawed. Firstly, because Pakatan did not seek an immediate removal of all excise duties but a staggered 20% reduction annually over 5 years.  This gradual reduction of excise duties will in effect result in approximately 4-5% reduction in car prices annually.  Hence the impact on the 2nd hand car dealers will be very limited.

Worse, even if BN is only able to achieve a 20% reduction in car prices in 5 years time, the same 2nd hand car problem will arise!

Secondly, Dato’ Mustapa must have failed his economics because a reduction in taxes will not result in loss of job opportunities.  Pakatan Rakyat is not asking the car companies to cut prices which will eat into their profits, which may in turn affect employment in the industry.  Pakatan Rakyat was asking to reduce government excise duties which will have zero impact on the car companies' profits and hence their workers' employment.  On the other hand, the reduction in excise duties will increase real disposable income for the average Malaysian and generate demand and economic activities in other key sectors of the economy.

The Minister even tried to scare Malaysians that cheaper cars will cause the trip from Shah Alam to Kuala Lumpur to take 3 hours due to greater traffic jam, which will then “cause” the construction of more “tolled highways”.  Dato’ Mustapa, who is typically more rational and intelligent, when compared to his cabinet colleagues has seriously outdone himself here.

The ownership of cars in Klang Valley has already exceeded the 1:1 ratio despite the substantially higher cost of cars, is entirely because the BN government has completely neglected the public transport sector over the past 50 years.  Malaysians are forced to buy pricey cars not out of choice, because the BN government is more interested to protect its crony car manufacturers who are unable to compete internationally and to enrich its toll concessionaires with uber-lucrative highway privatisation contracts.

We believe that this breach of a key manifesto promise by BN, prominently highlighted during the election campaign by the mainstream media will only be the first of many broken promises to come from Barisan Nasional.  There is no political will to transform the current crony economy which is suffering from excessive protection, inefficiency and corruption.

Instead, BN will use every excuse to tax Malaysians directly via multiple channels such as car excise duties and the Goods & Services Tax (GST), or indirectly via lucrative privatised utilities or highway concessions. Taxing the rakyat more, while maintaining the existing duties are the only means by which the BN government will be able to continue funding its largesse and excesses.