Industry captains hope for more clarity
NEARLY two years have passed since the Ministry of International Trade and Industry (MITI) first mentioned the introduction of a third National Automotive Policy (NAP), and still we wait with bated breath.
Last April, MITI Minister Datuk Seri Mustapa Mohamed said: “We’ve done our consultations. This time around, it was an extensive one where it included all branches from the car companies, to vendors, banks and the consumers. We will be presenting the papers to the Cabinet soon”.
At the same time, the Malaysia Automotive Institute (MAI) has repeatedly mentioned that the third NAP will be brand- and technologyneutral, adding that there will be incentives towards the promotion of energy-efficient vehicles (EEV) that meet a certain level of requirement for fuel economy and exhaust emission.
The institute also adds that it recognises many structural issues hampering the industry’s progress and that the upcoming NAP, which has been drafted by MAI, aims to address snafus made by the earlier 2006 and 2009 NAPs.
Since then, EEV has become an often-repeated buzzword by government officials and media alike.
Ironically, although bureaucrats from all levels of the administration like to talk about EEVs, nobody seems to have a clear grasp of what an EEV actually is.
Both MITI and MAI dangled EEV incentives to convince manufacturers to invest in Malaysia’s automotive sector, but when asked what defined an EEV, MITI or MAI have not managed to offer a clear answer.
So far, EEVs have been described in vague terms. To date, neither party has been able to answer the very simple question of what the minimum standard is, or how these numbers will be verified.
After several rounds of delay, the latest date announced by MITI for the revelation of the third NAP is Jan 15, 2014.
While we keep our fingers crossed that there will be no further delays, several car companies have voiced what they would like on their wish list for NAP 2014.
“We are looking forward to more clarity on the incentives for EEV. There should be more liberalisation in the auto industry to encourage foreign investment in Malaysia,” says Datuk Ben Yeoh, the executive director of Bermaz Motor Sdn Bhd, which represents the Mazda brand in the country.
Yeoh is an industry veteran with more than 40 years of experience. Starting out on greasy workshop floors as a technical executive for Cycle and Carriage (MercedesBenz) in 1972, Yeoh is known for his hands-on approach and deep understanding of the industry.
He was also central to reviving the Mazda brand and built a convincing business case for Mazda Motor Corporation to make Malaysia its export hub for the ASEAN region.
Mazda currently exports the CX-5 from Malaysia to Thailand.
Despite equipping the CX-5 with a full suite of Mazda’s proprietary SkyActiv fuel-saving technologies, the locally assembled CX-5 did not receive any special incentives.
It should also be highlighted that Mazda assembles a diesel-powered CX-5 variant, with a SkyActiv-D engine that is even more fuel efficient than the petrol variant.
Ironically, although this variant is exported from Malaysia, it is not sold here because the Malaysian diesel quality is not high enough for the car to run on.
The introduction of Euro 4 grade diesel, considered to be a bare minimum by global standards, has been delayed numerous times.
The initial schedule was 2012, but this has since been pushed to 2015.
In Europe, manufacturers are getting ready for Euro 6, which will be enforced in September next year. In the coming years, availability of engines that are compatible with Malaysia’s existing Euro-2M standard is going to be an issue.
Also, more and more new models will be launched with sophisticated engines that require a higher grade of fuel to operate on.
Other car makers are forced to put their investment plans on hold simply because many of their planned models cannot be introduced in Malaysia until a higher quality of diesel is introduced.
Keith Schafer, managing director of Volvo Car Malaysia says the company has plans to introduce more diesel-powered models, but this is dependent on the introduction of Euro 4 diesel, which the company is eagerly awaiting.
“Once a better quality fuel is launched, we will be able to expand our engine range considerably,” he says.
Schafer’s hopes are shared by his counterpart at BMW Group Malaysia.
“We hope that Malaysia will adopt the internationally recognised fuel at the Euro 4 standard, which is a cost-effective fuel alternative that also reduces harmful gas emissions to the environment,” says company president Dr Gerhard Pils.
He adds that Malaysia has a potential to become a regional hub for electric vehicle (EV) production, but persistent measures must be implemented to adopt the latest innovations in green technology.
These are measures such as extending incentives for fully imported hybrid vehicles, not limiting the incentives to certain engine sizes and also incentives for clean diesels and electric vehicles.
“Tax breaks should be created based on emissions and efficiency, and not solely on engine size,” he says.
Pils’ comments on support for EVs are echoed by Hoffen Teh, vicepresident of Mitsubishi Motors Malaysia.
“EVs still present many challenges, especially on the changing infrastructure development front. To further facilitate the popularisation of EVs in Malaysia, we hope that full-duty exemption will continue for all fullimported EVs, for the next five years perhaps.”
As for the aforementioned EEVs, Teh echoes Yeoh’s sentiments.
“Mitsubishi Motors Malaysia supports the idea of EEV encouragement, but EEV policies need to be more concrete,” he says.
He adds that EEV criteria should be better defined.
For example, affordable A- and B-segment models with a fuel economy of at least 20km per litre should entitled to reduction of excise duties.
Teh explains that the government can consider a gradual reduction of excise duties for models that meet such criteria, say from the current 75%, to 70% next year and 65% in 2015.
“This will further encourage price competitiveness for EEVs in the next few years within the automotive industry of Malaysia,” he says.
It should be highlighted that it was Mitsubishi Motors Malaysia (MMM) who made it possible for all car companies to introduce EVs in Malaysia.
In the past, definitions used in the Malaysia Road Transport Act did not reflect the Road Transport Department’s vehicle-type approval process (a compulsory process for all newly introduced models to go through) to register an EV model, as EVs do not have an engine number.
There were also other complications with regards to the Customs clearance processes.
Working closely with several government agencies, MMM paved the way for EVs, including those made by companies such as Nissan or BMW.
Volvo Car has big plans for Malaysia, but is held back by the lack of suitable grade fuel.
Excise duties for affordable fuel-efficient cars that go 20km per litre or more should be reduced in phases.