From a nation building standpoint, the government’s role is to formulate economic policies that above all, optimise the standard of living for all citizens. The policies must strike a balance between protecting citizens and allowing market forces to thrive.
High-income nations in the world have practiced some form of liberal market model. To achieve high living standards, businesses must thrive and provide jobs to citizens. However, businesses must also be responsive to market demands. When an imbalance to these factors occur, government policy is crucial to reinstate balance.
With respect to the automotive sector, this balance is struck through the various policies and blueprints that address the need for transportation across the Malaysian landscape.
Policies such as the National Automotive Policy (NAP2014), the National Green Technology Master Plan, the upcoming National Land Public Transport Masterplan and the National Transformation (TN50) work in unison to address the balance needed so that the public and private sectors continuously address the needs of citizens through spurring a sustainable economic ecosystem.
The NAP looks at the automotive industry with the same balance in mind. At its core, the policy aims to ensure that transportation is accessible and affordable to all, and works hand in hand with roadmaps that enhance businesses and career opportunities.
From a public perspective, it is natural to desire a car market where prices are cheap. Cars are often seen as basic needs. Sometimes they are described as symbols of freedom, even symbols of social status.
It is also this very depiction that leads to the assumption that cheaper cars are the solution to our woes.
We must all be wary that sticker price is one of many issues that are being addressed by the government. The caveat, if you haven’t guessed it by now – is whether or not a simple price reduction can strike the balance we spoke of above.
Let’s get one thing out of the way – car prices are not controlled by the government, but rather determined by car manufacturers. As far as the government is concerned, it sets the policy that strikes the balance between the needs of the public, the industry, the economy and the environment.
How do we strike this balance when it comes to automotive policy? Let’s focus on these two main points for now.
Firstly, cheaper cars are seldom safe cars. Malaysia became a signatory to the WP29 in 2006, and has introduced new vehicle safety regulations that comply with global safety standards. Today, entry models our market come with a minimum airbag count, ISOFIX child restraints and most recently, 3-point selt belts for all passengers.
Many new regulations are currently being debated – including ABS and VSC.
Secondly, the world is moving towards environmental policies that affect trade regulations, especially after milestones reached at the recent Paris Agreement in the area of climate change. It is for this reason the NAP2014 focuses on energy efficiency in the vehicles we produce, as well as the processes that produce them.
In order to achieve the above, businesses must commit to investments that comply with such policies. They have to wade through market forces to bring better vehicles to the demanding Malaysian market, while maintaining the affordability of their products. To achieve this, the NAP2014 awards customised incentives to original equipment manufacturers that fulfil such requirements, including income tax breaks, resesarch and development benefits and excise duty reduction.
The NAP2014 achieved numerous milestones in elevating the industry, and has made the industry ecosystem more competitive, despite economic challenges.
Even then, we achieved a 13.1 per cent compounded average car price reduction between 2013 and last year – with our local entry models emerging as the cheapest in the ASEAN region. Despite cars being more affordable, they have also become safer products for Malaysians.
Above all, vehicle ownership is not just about prices, but must also take into account the entire customer lifecycle – including fuel costs, maintenance, insurance and road taxes. If viewed holistically, vehicle ownership in Malaysia is still affordable, safer and more energy efficient
At the end of the day, the key here is balance.
The writer is the chief executive officer of Malaysia Automotive Institute.