Opinion: NAP 2014 fails to convince
After much delay, NAP 2014 is finally announced, and it’s time for all relevant stakeholders of the industry to take stock of their current positions and examine their prospects moving forward. Unfortunately however, the media briefing held at MATRADE yesterday by the Minister of International Trade and Industry, Dato’ Sri Mustapa Mohamed, left us with even more unanswered questions than before.
In keeping with the best practices of the Government, NAP 2014 starts off with very promising statistics and projections. Goals are invariably ambitious, and to the Government’s credit, key issues that hinder the industry’s progress, namely high prices of cars, low quality of fuel, and the contentious issue of open APs are all acknowledged, even if none were convincingly addressed.
Much talked about is the desire to make Malaysia the regional production hub of energy efficient vehicles. Here, the Government scores another plus point by clearly defining what it considers as an energy efficient vehicle. A proper schedule was drawn out to describe the relevant parameters, namely kerb weight and fuel consumption, but beyond this is where it all goes down hill, and to be frank, I don’t even know where to start questioning.
Let’s start with measuring. The Government has specified that the New European Driving Cycle be the standard of measurement for vehicles seeking to apply for EEV status, but the problem is that a lot of models sold in Malaysia are not offered in Europe and are consequently not tested under the European driving cycle. This is not an issue for, say, the Volkswagen Golf, but an Asia-only model like the Toyota Vios or Nissan Teana may have problems. Additionally, it is also worth noting that even if a given model is sold in Europe, engine selections may vary between regions. The Ford Fiesta, for example, is not offered with the 1.5-litre engine we get here in Europe.
Direct comparisons between fuel consumption figures obtained under different test cycles are not possible and neither is there a formula which allows conversion from one to the other. So, if a car seeking to apply for EEV incentives is one that does not have a certified NEDC fuel consumption figure, tough luck. Manufacturers are expected to send their vehicles to any certified labs around the world and have them tested. Such tests are not cheap, and it is questionable if any manufacturer would see the value of spending that money and effort specifically for a market which is not likely to yield more than several thousand units a year per model.
So, what sort of goodies await vehicles that qualify for EEV status? The answer is customized incentives, and this opens a lot of question marks on accountability and transparency. What essentially happens is that we now have clear definitions of how your car can qualify to be an EEV, but once you get into the party, it’s a free-for-all. The amount of incentives extended to the manufacturers will essentially boil down to their respective abilities to negotiate favourable terms with the Government. So, it is entirely possible that two manufacturers going to the Government offering exactly the same sort of commitments coming away with entirely different sets of incentives.
In the presentation yesterday, comparisons were drawn against similar green car policies adopted by Indonesia and Thailand, and a positive spin was put on the Malaysian policy saying that companies coming in are not subjected to restrictions of any kind; no commitments whatsoever, just come and build, terms are negotiable. Reading between the lines, this adds up to a less attractive preposition because it leaves too much room for arbitration on the Government’s part. Simply put, there is no consistency in the rules of engagement, and this is the number one criticism that the representatives of foreign car makers have been leveling against our Government behind closed doors.
The Government also further reiterated its commitment to have car prices reduced by 2014. During the briefing, Mustapa also pointed out that since 2004, car companies were no longer required to submit vehicle prices to MITI for price approvals. In years past, foreign brand vehicles were instructed to price their vehicles above a certain level as a measure to protect the national makes. There are a number of examples of models that were priced too low for the Government’s liking and were instructed to revise their prices upwards. Such a practice is no longer in place, Mustapa clarified.
Mustapa went on to clarify that a car price reduction framework is in place to ensure a 20-30% decrease in motor vehicle prices over the next five years, but details of that framework were not elaborated upon, we were only told that it involves market liberalization and no further explanation were offered. The minister further highlighted that reduction of motor vehicle taxes from the current level are not possible because of the Government’s fiscal situation at the moment. I have no problems with this particular explanation, and I can understand that no Government will forgo a RM9.8 billion revenue stream. Only question is, where did the Government get the idea that car prices will fall 20-30% just like that?
Other bones of contention, and both particularly affect European car makers, are the issues of fuel quality and open APs. As we know, Malaysia’s current fuel quality of Euro 2 are woefully behind the times, and the Euro 4 standard which we are supposedly aspiring to has been phased out five years ago. How the Government reconciles this discrepancy with a desire to be the regional production hub of energy efficient vehicles is beyond us.
In their quest for improved efficiency, new European powertrains are pushed closer to their engineering limits, which affect their tolerance for low quality fuels. As it is, many brands already have to launch new models with either old or detuned engines here. The implementation of Euro 4 really cannot come soon enough, yet all we had yesterday was that the matter is still ‘under study’ and a road map will unveiled hopefully in two months time.
Also ‘under study’ is the future of Open APs, which are scheduled to be phased out by the end of 2015 as promised in NAP 2009. Mustapa emphasized that the Government is not backtracking on that promise, but the issue has turned out to be more ‘complicated’ that previously thought. He further promised that brand owners will be consulted on this matter before further announcements will be made.
One matter that was indeed clarified at the announcement yesterday was the vehicle end-of-life policy. Mustapa clarified that there will be no mandatory inspection of vehicles and scrappage. Instead, a voluntary inspection scheme will be implemented and vehicles that pass inspection may even enjoy certain rebates in road tax. This particular policy is worth looking further into although its overall details and mechanism of implementation remain vague.
NAP 2014 offered seasoned observers of the automotive industry few surprises and even fewer joys to celebrate. The policy contains too much ambiguity to convince industry players to pledge any significant investments. It is a policy of good intentions, but weak in direction and clarity. If the Government is serious in attracting car makers to pump more money into our country, it has to start with being decisive and consistent in its policy-making.
Editor’s Note: Views expressed in this article are the personal opinion of the writer and does not necessarily reflect the official stand of this publication.
