Business

Wednesday October 28, 2009

Mixed views on RM10,000 fee for open APs

By JAGDEV SINGH SIDHU and EUGENE MAHALINGAM


Auto dealers say they are still digesting the news

PETALING JAYA: The imposition of a RM10,000 charge on the price of open approved permits (APs) from next year is expected to hit the business of the grey market importers but foreign car companies in the country may benefit from the new charge.

“The issue is whether they pass on the cost increase to their customers or not,” Malaysian Automotive Association president Datuk Aishah Ahmad told StarBiz.

During the tabling of Budget 2010 last Friday, the Government proposed that open APs no longer be sold for a measly few ringgit, instead slapping a RM10,000 fee for such a document.

A portion of the money collected from the sale of open APs would be channelled to the Bumiputra Development Fund in the automotive sector.

A shot of a used car lot in Kuala Lumpur. AmResearch says the new prices for the open APs was a preliminary measure ahead of the opening up of the local auto sector.

A Klang Valley-based used car dealer said he did not know what to make of the news.

“It applies to dealers like us selling ‘recon’ cars. It generally costs RM40,000 to RM50,000 for an AP. An additional RM10,000 is not good news,” he said, declining to be named.

“I’m hoping that the additional RM10,000 will be absorbed (by the AP holder) and not passed on to us. But even if they do, it will depend if we want to pay, because I feel RM10,000 is quite high.” An open AP entitles the holder to import any brand of car from any country.

Another dealer, who also requested anonymity, said the new price of an open AP next year would be an added burden to grey market importers and importers of used cars.

“The price of a recon car is going to go up. I don’t think the AP holders are going to absorb the cost just yet because they have been enjoying the current value of around RM40,000 for an open AP,” he said. “They might absorb the cost if demand (for open APs) takes a hit.”

The dealer said the lower-priced segment of cars brought into the country using open APs would be worst hit. He does not expect the increase in price though to hit demand for supercars such as Ferraris or Porsches.

Another local used car dealer said the topic was “too sensitive” to discuss and declined comment, while another dealer selling local cars said the measure only applied to those who sold imported cars.

Other dealers contacted by StarBiz indicated they were still digesting the news and would not be officially making a comment. It was reported that in 2008, 38,100 vehicles were imported using open APs.

For franchise AP holders, it is business as usual. “At the moment we are getting what we need,” Honda Malaysia Sdn Bhd head of sales and marketing Go Suzuki said of the group’s supply of APs.

“Indirectly, there might be better sales opportunity.”

Cars that are brought in by franchise car importers, meaning the appointed distributors of marques, enjoy unlimited number of APs if the car comes from another Asean country.

If the car is imported from outside South-East Asia, there is a limit to the number of APs given to each distributor.

AmResearch said the new prices for the open APs was a preliminary measure ahead of the opening up of the local auto sector with the aim of enhancing competitiveness among industry players.

“As a direct impact, this move will likely weed out weaker and less-competitive open AP holders (parallel importers),” it said.

While the issuance of open APs is restricted to 10% to 20% of the total industry volume, AmResearch said the issue of parallel importers undercutting price and, to a certain extent, affecting sales of franchise AP holders for certain overlapping models, had long been debated.

“This is especially so in view of investment (in major infrastructure like assembly plants, distribution and after-sales network) and employment creation that franchise AP holders have brought to the country,” it added.

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