Daim suggests abolishing open Approved Permits for cars
NOVEMBER 20, 2013
Former finance minister Tun Daim Zainuddin has suggested that the government
consider abolishing the open Approved Permits (APs) policy required for the import of vehicles to help reduce the
cost of owning cars in Malaysia.
“Removing the APs would translate into cheaper cars for the rakyat,” he said here
Daim was commenting on a statement by Mercedes-Benz Malaysia Sdn Bhd President and
Chief Executive Officer, Roland S. Folger, who had said that such a move would mean cheaper cars and encourage car
manufacturers to increase their investments to produce more affordable cars locally.
“For me, there is one way we can reduce car prices. It’s a simple solution to the
issue (and that is to) do away with open APs,” Folger told The Sun newspaper recently.
Daim said the government would have to take positive steps in the
soon-to-be-revised National Automotive Policy (NAP) in order to consider the interests of larger sections of the
population rather than a selected few.
It has been reported that 98 companies are Open AP holders for the import of cars
into the country.
Industry analysts have often debated how to make the local automotive industry
more competitive, encourage greater investment and re-investment, and for cars to be more affordable
Folger had also highlighted the fact that removing open APs would not hurt
government revenue collection but would even serve to enhance its collection.
Industry analysts say that the government could do away with an extra layer of
people in the business equation and pass on the cost savings to the rakyat as open AP holders charge several
thousand ringgit for each transaction processed.
The cost savings could be used by the government to spur the industry further or
chanelled to more productive spending, they add.
Analysts suggested that the government could tender out the Open APs to earn more
revenue, which in turn may reduce taxes for car buyers to make the cars more affordable.
Open APs are usually used by parallel importers to import re-conditioned luxury
cars to sell them at slightly lower prices than the locally-assembled ones.
For example, an Internet check revealed that a new Mercedes-Benz E200 is sold from
about £35,000 (about RM179,000) in Great Britain compared with RM366,000 for the same locally-assembled model in
A second-hand Mercedes-Benz E200 in Great Britain would be even cheaper by about
£10,000 or about RM51,000, depending on the year of manufacture and mileage covered.
Grey importers, or open AP holders, then take advantage of the higher
price differential in Malaysia to sell the “re-conditioned” E200 from between RM270,000 and RM290,000 each, even
after paying for taxes.
This discount is often seen as “advantageous” to the consumer but is at the
expense of the manufacturer who has to incur additional costs like local procurement, assembly costs, branding and
promotion, sales and after-sales service.
Doing away with open APs would also eliminate Malaysia as one of the top
destinations for luxury second-hand cars in the world, the analysts note.
They stress that the government would have to re-examine the whole automotive
industry structure, including areas like the tax regime and end-of-lifespan of cars, to ensure that it can move
forward since the national car makers have been around for almost 20 to 30 years as the first Proton Saga rolled
out in July 1985 and the first Perodua Kancil emerged in August 1994.
The NAP was introduced on March 22, 2006 and subsequently revised in 2009 and 2012
aimed at promoting a competitive and viable domestic automotive sector, in particular, national car
It was also to promote Malaysia as an automotive regional hub, by integrating the
local automotive industry into regional and global industry networks within the increasingly liberalised and
competitive global environment.
Analysts also say that providing for greater competition would shake out the
complacency among local car manufacturers and their local parts suppliers.
They also hope that the revised NAP would look at the larger picture and help
rejuvenate the local automotive industry to become a foreign exchange earner for the country.