Malaysian carmakers have to buck up under TPPA

With the impending Trans-Pacific Partnership Agreement (TPPA), Malaysian carmakers, Proton and Perodua, will have to buck up or bow out of the local automotive industry - the International Trade and Industry Minister, Datuk Seri Mustapa Mohamed, said as much during an interview on a local station last week. While certain sectors like electronics, oil palm and rubber would benefit from the pact, the domestic automotive industry would face an onslaught of competition from competitively priced foreign cars.

When it takes effect, the TPPA will eliminate the protectionist policies that have been shielding Proton and Perodua, and had played no small part in giving them a combined market share of more than 50%. “With the new competition, they will have to increase their quality and efficiency. But this is good for consumers as they will get good prices and quality,” Mustapa said. 

On the other hand, the TPPA opens up Malaysia to a market of 800 million consumers from 12 countries, which collectively are responsible for 40% of the world’s GDP, and other countries have expressed interest in joining, including Indonesia, the fourth largest population in the world.

Perodua is still showing solid sales numbers despite the dip in total car sales since the implementation of the GST and the sliding Ringgit; the automaker might like to hustle its top-selling MyVi and Axia models in the other TPP member countries, under laxer regulations.

The weakened state of the Ringgit, however, could mitigate the price reduction. Industry experts are split. The CEO of the Malaysia Automotive Institute, Mohamed Madani Sahari, is optimistic that there are cheaper cars not too far down the road, as a car price rationalisation exercise started in 2014. He said, “By 2018, we estimate a 20%-22% price reduction. As at May this year, car prices have been reduced, on average, by 16.5%.”

The President of Malaysia Automotive Association (MAA), Datuk Aishah Ahmad, however, disagrees. She expects car prices to go up next year “due to the foreign exchange factor”.

As it is, some automakers have already announced price increases. UMW Toyota will be increasing the prices of its cars across the range, by 4%-16%, starting form January 2016. Honda Malaysia will be adding another 2%-3% to prices of its models as well, while Mitsubishi Motors Malaysia has also confirmed that all its models will go up in price by the first quarter of 2016. 

MAA has not changed its sales forecast for this year as automakers have been offering incentives and attractive loan packages in a bid to increase sales, and consumers are beginning to buy cars again, knowing that prices will go up as soon as beginning of next year. 

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