Research house positive on automotive sector

PETALING JAYA: Maybank IB Research maintains its positive call on the automotive sector following news of the Transport Ministry’s study of vehicle lifespan being in the final stage.

“This could eventually bring forth the long-awaited End of Life Vehicle (ELV) policy which could include incentives for owners to change road-unworthy old cars (beyond a certain age) for new ones,” it said in a report yesterday.

“While full implementation of the ELV policy is unlikely for now, we laud this proposal, for it will enhance road safety as well as sustainability of the auto sector,” it added.

It said that the full implementation of the ELV policy for both passenger and commercial cars could boost total industry volume/total industry production (TIV/TIP) in the immediate three to five years while ensuring the long-term sustainability in auto demand and road safety.

It estimates that about a quarter of the 13.3 million private passenger cars on the road as of June 2017 are more than 10 years of age (about three million cars) and these cars should be tested for their road worthiness to ensure public safety.

Recall that a small-scale auto scrapping scheme named the Proton Xchange Programme conducted by Proton back in March 2009, saw over 25,000 applications recorded in the ninemonth period. However, the programme was discontinued when allocated funds were exhausted.

Maybank IB Research said full implementation of the ELV policy may only materialise in two to three years’ time, which would benefit the national marques (Proton and Perodua) due to their lion’s share of the mass market A/Bsegment models.

However, full ELV implementation is beyond reach now due to insufficient inspection points. A total of 450 inspection centres is required to enable mandatory inspection for cars beyond a certain age but there are currently only 55 computerised vehicle inspection centres nationwide operated by Puspakom.

“Unless there are sufficient centres, it may make more commercial sense, in our opinion, if the ELV policy (if it comes) is first implemented on commercial vehicles (10% of total TIV), in light of recent fatal accidents involving older trucks and buses,” it said.

It noted that safe public transport was one of the issues addressed in Budget 2018 and that RM45 million has been allocated to develop a biometric control system to monitor bus drivers, indicating the government’s concern and possible further action to reduce accidents involving commercial vehicles.