Malaysia Election Results: What it means for automotive industry - Regulatory Foresight - Frost & Sullivan
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Regulatory Foresight Malaysia Election Results: What it means for automotive industry 10th May 2018 Regulatory Foresight - Malaysia Election Results: What it means for automotive industry 1
Background
Announcement of results of the 14th General The following is a quick assessment of pre-poll
Election in Malaysia - Victory of the Opposition promises versus likely post-poll implementation
coalition, Pakatan Harapan (PH) over the ruling over the next 3 months. A more detailed
coalition, Barisan National (BN) marked a major assessment would only be possible later when
turning point to the country. there is more detailed understanding of the
action plans and intent of the new Government.
Prior to the elections, the opposition coalition
had issued an election manifesto promising
certain measures to jumpstart the economy and
restore institutional processes and neutrality.
Some of these measures are also likely to have an
impact on the automotive sector. These can be
summarized as follows:
Setting up a new National Car Company
Review of the National Automotive
Policy
Rollback of the Goods and Services Tax
(GST)
Reintroduction of fuel subsidies and
lowering of taxes
Standardize and increase the minimum
wages
Review of all large projects and
initiatives such as the Rail Link, and so
on
Withdrawal from Trade negotiations
such as the CPTPP
2 Regulatory Foresight - Malaysia Election Results: What it means for automotive industry
F&S Perspective
1. Setting up a new National Car Company off at the earliest. Any delay could be detrimental
to the stated objectives.
Dr. Mahathir Mohamad, chairman of PH has
expressed his desire to set up a new National Car 3. Rollback of GST
Company on the lines of Proton.
PH has promised to remove 6% GST and reinstate
IMPACT the earlier SST (10% Sales & 6% Service Tax).
This could significantly alter supporting policies
and the market structure itself. Depending on the IMPACT
technology and the focus segment, this move is For cars, the rollback would mean a sales tax of
likely to change the competitive dynamics of the 10%, instead of 6% GST, imposed on the
market. Government approved selling price (comprising
the car’s open market value in case of locally
CHALLENGES & UNCERTAINTIES assembled vehicles and CIF in case of imported
The biggest challenge would be to ensure vehicles, along with the import and excise
viability of such a company given the fact that duties). Consequently, there would likely be some
the market has been stagnant for the last few change in car prices, but nothing significant as
years and there is significantly high the calculation mechanism itself would be
motorization. Government may be able to do so different.
by affording protection to certain segments /
technologies, stimulating growth which could On one hand, the rollback of GST is unlikely to
again skew demand. have any impact on auto service as the tax rate
(6%) under SST and GST would be the same. On
2. Review of the National Automotive the other hand, the rate of insurance cover is
Policy likely to see a decline, as prior to GST, it was not
under the ambit of any tax (only stamp duty).
Review of the NAP Framework and its objectives
and mechanisms While the impact in terms of prices is unlikely to
be significant, it will positively boost consumer
IMPACT sentiment which will stimulate overall vehicle
Though the NAP 2018 framework has been demand and shore up the TIV further.
announced, the rollout of the policy by June/July
this year should see delay as MAI will need to CHALLENGES & UNCERTAINTIES
recalibrate the objectives and mechanisms and As GST is the key mechanism to fund the country’s
align them with the new Government intents. budget and operating expenses (contributing
close to RM 44 billion in tax revenue), the key
CHALLENGES & UNCERTAINTIES challenge for PH would be to find a new source
In order to jumpstart the industry and fast track to make up for the shortfall (SST would bring in
investments, it is imperative for NAP 2018 to take around MYR 15 billion only).
Regulatory Foresight - Malaysia Election Results: What it means for automotive industry 3
4. Reintroduction of fuel subsidies and 5. Standardize and increase the minimum
lowering of taxes wages
The fuel prices are currently determined PH plans to standardize wages across Malaysia
through a managed float system. To reduce the and enhance the minimum wage level from RM
market volatility, PH plans to reintroduce fuel 1,000 to RM 1,500 within five years. Out of the
subsidies targeting the lower income groups. The RM 500 increase, 50% will be contributed to the
filter to be used is ownership of cars less than government and 50% by the employer.
1,300 cc, using a mechanism based on the
myKad, Malaysia’s national identification card. PH IMPACT
also plans to reduce excise duties on imported This should exert significant burden on private
cars below 1,600 cc for first time car buyers. sector employment, and may tighten hiring and
Only one car will be allotted per household promote layoffs as employers try to manage the
which is earning below RM 8,000 a month. wage hike and stay profitable. On one hand, in
the automotive context, the vendor base might
IMPACT be significantly hit by this. On the other hand,
While abuse of the system is highly probable, a workers across sectors would welcome this
shift in demand toward cars less than 1,300 cc is move, improving market sentiments.
quite likely as well. This could significantly alter the
demand pattern and the industry structure. With CHALLENGES & UNCERTAINTIES
regards to the lowering of duties for first time Government will have to make budgetary
buyers, as in case of Thailand, focusing on lower provisions for the additional monetary support to
income groups may impact their ability to pay the workers. Like in case of subsidies,
back loans and may result in an adverse impact Government’s ability to secure additional funds
on the used car market. Stricter financing norms for these pay-outs would be questionable.
may further lessen the positive impact on
demand for such cars.
CHALLENGES & UNCERTAINTIES
The success of these schemes would depend on
water tight execution. Moreover, reintroduction
of fuel subsidies would need Government
funding. Similarly, lower tax collection from first
time buyers would be like a double whammy for
the Government – offering more subsidies while
reducing tax income.
4 Regulatory Foresight - Malaysia Election Results: What it means for automotive industry
6. Review ofalllargeprojectsandinitiatives 7. Withdrawal from CPTPP
such as the Rail Link, and so on
Rollback of Malaysia’s commitments under
All large scale projects are likely to come under CPTPP and other potential FTAs like the RCEP.
scanner.
IMPACT
IMPACT This may not have an immediate impact on the
Approvals for fresh automotive investments are auto sector. Most of the commitments have
likely to be delayed. been long term and unlikely to significantly
change the industry dynamics in the near term.
CHALLENGES & UNCERTAINTIES However, the component sector is likely to lose
Government will be looking up to new out on access to key export markets and given
investments to help realize its intent. For some that Thailand has expressed its desire to join
projects, any form of delay or bureaucratic CPTPP, this may not bode well for Malaysian
overreach may push some of these projects to exports in the long term.
competing markets or adversely impact their
viability. CHALLENGES & UNCERTAINTIES
Malaysia needs these FTA agreements to ensure
market access and stay competitive in key export
markets, not only for automotive but also for
other sectors. There is strong competition from
markets such as Thailand and Malaysia will have
to come up with strong counter strategies.
Regulatory Foresight - Malaysia Election Results: What it means for automotive industry 5
Final Word
Overall, PH’s plans still hinge on protectionism, It is important to filter pre-poll political rhetoric
subsidies, and pay-outs. Given the fiscal situation from post-poll realities of the market and
of the country, additional subsidies and rollback international commitments. We shall have a
of taxes will put pressure on the system. clearer picture of the emerging scenario in the
coming months.
6 Regulatory Foresight - Malaysia Election Results: What it means for automotive industryWe Accelerate Growth WWW.FROST.COM
Auckland Colombo London Paris Singapore
Bahrain Detroit Manhattan Pun Sophia Antipolis
Bangkok Dubai Mexico City e Sydney
Beijing Frankfurt Miami Rockville Centre Taipei
Bengaluru Iskandar, Johor Bahru Milan San Antonio Tel Aviv
Bogota Istanbul Mumbai Sao Paulo Tokyo
Buenos Aires Jakarta Moscow Seoul Toronto
Cape Town Kolkata New Delhi Shanghai Warsaw
Chennai Kuala Lumpur Oxford Shenzhen Washington D.C.
Silicon Valley
ABOUT FROST & SULLIVAN
Frost & Sullivan is a growth partnership company focused on helping our clients achieve transformational growth as they are
impacted by an economic environment dominated by accelerating change, driven by disruptive technologies, mega trends, and
new business models. The research practice conducts monitoring and analyzing technical, economic, mega trends, competitive,
customer, best practices and emerging markets research into one system which supports the entire “growth cycle”, which enables
clients to have a complete picture of their industry, as well as how all other industries are impacted by these factors.
Contact us: Start the discussion.
To join our Growth Partnership, please visit www.frost.com.
CONTACT INFORMATION:
Frost & Sullivan Global 877.GoFrost APAC
100 Beach Road myfrost@frost.com (65) 6890 0999
#29-01/11, Shaw Tower apacfrost@frost.com
Singapore 189 702
Copyright Notice
The contents of these pages are copyright © Frost & Sullivan. All rights reserved. Except with the prior written permission of Frost &
Sullivan, you may not (whether directly or indirectly) create a database in an electronic or other form by downloading and storing all or any
part of the content of this document. No part of this document may be copied or otherwise incorporated into, transmitted to, or stored
in any other website, electronic retrieval system, publication or other work in any form (whether hard copy, electronic or otherwise) withoutthe prior written permission of Frost & Sullivan. 8 Regulatory Foresight - Malaysia Election Results: What it means for automotive industry
You can also read
