The Star Business, Wednesday, June 22, 2011


SOURCE:

Wednesday June 22, 2011

Car sales impacted by amended Hire-Purchase Act

By THOMAS HUONG and EUGENE MAHALINGAM
starbiz@thestar.com.my 

PETALING JAYA: Worried about the possibility of trickling cashflow, a rise in booking cancellations and longer leadtime for completion of sales, many stakeholders in the automotive sector say the recent amendments to the Hire-Purchase Act 1967 (HPA) will hurt the car retail trade. Already, there are complaints of a slowdown in sales.

While some car marque franchise holders and dealers said they were supportive of the amendments, which aim to protect vehicle buyers from losing their booking fees and deposits paid to unscrupulous sales advisors and car dealers, among other benefits, many automotive stakeholders have described the amended Act as “confusing” and “troublesome.”

One car dealership's general manager said the situation was “unbelievable” and the amended Act overly protected consumers to the detriment of car retailers.

The Proton Edar Dealers Association Malaysia (PEDA) and Federation of Motor and Credit Companies Association of Malaysia have urged the Government to defer and review the amendments to the Act.

Ready to roll: A new car undergoing inspection before rolling out. The recent amendments to the Hire-Purchase Act may result in car buyers placing ‘phantom bookings.’

 

PEDA president Armin Baniaz Pahamin claimed that Proton car sales had dropped by 50% since last week. Another car dealership's general manager claimed that the sales of a Japanese car marque had also dipped significantly.

“Normally, the Japanese principal allocates between 150 and 200 cars to its dealers each week. In the last few days, the allocation dropped to only 10 cars. This is because until we have firm orders (meaning booking fees), we will not order the cars from the principal,” he claimed.
Under the amendments, effective June 15, all used vehicles for sale will undergo Puspakom's 18-point inspection to ensure their roadworthiness.

Another issue of contention was the 1% maximum booking fee (based on the total selling price) mandated by the amended Act, which requires car sellers to refund customers 90% of the booking fee if the deal falls through.

Armin pointed out that unlike in the past, presently car sellers or dealers could not accept booking fees before the car buyer was served with a Second Schedule notice.

“The Second Schedule notice can only be completed and served, in practise, usually after the hire purchase loan application is approved.,” he said yesterday. The remaining 9% downpayment on the car can only be paid when the hire purchase agreement has been prepared, with details such as the car's chassis number included.

This means the hire purchase agreement can only be prepared after the actual car unit has been allocated to the dealership.

“Now, with the amended Act, a car buyer can place phantom bookings' at several different car dealerships without paying booking fees. This will result in a waste of loan application resources and inefficiencies for banks and car dealers,” said Armin.

He said car buyers would have to pay more visits to car dealers or banks to sign documents.
With the amended Act, car dealers would face cashflow problems as they would lack the booking fees and downpayments as working capital to pay for the cars ordered from their principals.

Armin claimed that the Government did not consult stakeholders before implementing the amended Act.
Meanwhile, car dealers and marque franchise holders have expressed unhappiness over the issue and said the car buying process now involved more paperwork.

“We are studying the implications on our current vehicle-promotion packages,” said an industry source.
One car dealership manager in Alor Setar said the amended Act made it tough for dealers to offer “zero downpayment” or “full loan” packages.

Perusahaan Otomobil Kedua Sdn Bhd managing director Datuk Aminar Rashid Salleh said while the company supported the amended Act, automakers that sold cars in high volumes might see sales impacted.
“We may not be able to efficiently register the vehicles on time for our customers, especially during the month-end rush.

“This is due to the longer process flow that requires detailed paperwork between the banks, Perodua and our customers.”

RELATED ARTICLE:

http://star-motoring.com/News/2011/Amended-Act-expected-to-hurt-car-sales.aspx

Used car dealers protest against new inspection requirement

Used car dealers protest against new inspection requirement


By ISABELLE LAI
SOURCE: http://www.thestar.com.my/news/story.asp?file=/2011/6/7/nation/20110607143521&sec=nation


KUALA LUMPUR: Frustrated used car dealers nationwide are protesting against the 18-point inspection requirement that was included in the amendments to the Hire-Purchase Act 1967.

Effective June 15, all used vehicles for sale will need to undergo Puspakom's 18-point inspection (B7).

Federation of Motor and Credit Companies Associations of Malaysia (FMCCAM) secretary-general Khoo Kah Jin said the B7 would incur unnecessary costs for consumers.

He said Puspakom's current four-point inspection (B5) - on the chassis number, engine number, windows and windscreens as well as cut-and-join parts - was sufficient.

"The B7 inspection is unnecessary as the additional 14-point inspection will be based on visual checks which are unreliable," he told reporters during a protest by the Kuala Lumpur and Selangor Car Dealers and Credit Companies Association here Tuesday.

Khoo said the new rule would only benefit Puspakom as customers would have to pay an additional RM90 for the B7 inspection on top of the original RM30 for B5.

Another issue of contention was the 1% maximum booking fee mandated by the amendments, which requires used car dealers to refund customers 90% of the booking fee if the deal fell through.

"If we collect RM100 for a RM10,000 car, we will only get to keep RM10 if the customer pulls out at the last minute. This is very unfair," he said.

Liberalisation in the used car market?

The Star Business, Saturday March 19, 2011

SOURCE...


Liberalisation in the used car market?

THE issue of Approved Permit (AP) has long been a contentious subject and a target of constant criticisms.
Introduced in 1970, the objective of the AP system was to promote and provide opportunities for bumiputra entrepreneurs in the automotive sector.

Part of the review of the National Automotive Policy (NAP) announced in October 2009 by the Government and aimed at creating a fair, liberal and transparent policy included doing away with the AP system.

A used car dealer in the Klang Valley. ‘Not everyone can afford new vehicles and many also do not want the hassle of paying a car loan,’ says a dealer.

 

Under the NAP, open APs (which allows the bumiputra holders to import any brand of car from any country) will be scrapped by Dec 31, 2015, while franchise APs (which allows holders to import specific brands and makes from its principal) will be terminated by Dec 31, 2020.

The question is whether this would actually happen. Under the first NAP in 2006, the AP system was supposed to be abolished by 2010.

No political will

However, when the time came to implement it, many believe that the Government buckled under pressure and ended up postponing the termination of the open AP and franchise AP systems to 2015 and 2020 respectively.

“The APs are said to be given away free to the (bumiputra) entrepreneurs to kick-start their businesses, but over the years, many of them ended up selling them to third parties for profit rather than importing cars for themselves,” says a local used car dealer, who wishes to remain anonymous.
At Budget 2010 two years earlier, the Government slapped a RM10,000 fee for the issuance of each open AP.

The RM10,000 charged, meanwhile, would be used by the Government to set up a fund, with the money to be used to ensure smooth and orderly shift of bumiputra entrepreneurs to other business sectors.

“The RM10,000 fee is a burden for used car dealers as it can cost between RM40,000 and RM50,000 (for us) to purchase an AP. Of course if it's a more expensive car, the (AP) cost would be higher,” says the used car dealer.

With the abolition of APs, it would be a “free-trade” system, he says. “That means that anyone would be able to import vehicles.”

A Klang Valley-based used car dealer doesn't believe that a liberalisation of the automotive industry, especially the abolition of APs, will ever happen.
He says although the abolition of the open AP system by 2015 is a good move and sounds promising, he thinks it won't happen given the strength of the lobbyists.

“How can they abolish the APs? If that were to happen, so many bumiputra business people would be affected. You can talk about it, but I don't think it will happen at least not in my lifetime!”

Proponents of APs

The Association of Malay Importers and Traders of Motor Vehicles Malaysia (Pekema) meanwhile, is hopeful that APs will be maintained.

Vice-president Sharifah Noor says bumiputra entrepreneurs that were dependent on APs would be hurt as they had invested considerable sums in the business.

She says the automotive business is its members' main income stream and a springboard for them to venture into other businesses.

“Even though our members have diversified businesses, the cash cow is still the AP business. Removing it (the AP) will affect their other businesses.

“Our members contribute a lot to the Government in terms of import and excise duties as well as sales tax.
“If you don't look after their interests, there will be some impact on the country's economy,” Sharifah says.
Earlier last year, it was reported that Pekema Sabah branch had asked for the review of the (RM10,000) levy charged on open APs to import used vehicles. Pekema Sabah had also requested the Government to review the policy to end the AP system.

Pekema Sabah chairman Rozman Isli says the levy of RM10,000 for the issuance of each open AP is a burden to members, especially during the economic slowdown.
Sharifah says Pekema has proposed to the Government to split payment of the RM10,000 levy into two parts to make it easier for its members.

“The levy has been approved and Miti (International Trade and Industry Ministry) is finalising it with the Road Transport Department,” she says.

Earlier this year, it was reported that Pekema Sarawak had urged the Government to set up the Bumiputra Economic Performance (BEP), a unit akin to the Performance Management and Delivery Unit to specifically plan, implement and monitor the economic performance of bumiputras.

The BEP is expected to be a permanent secretariat and headed by a chief executive officer with ministerial rank who reports directly to the Prime Minister, according to Pekema president Datuk Zainuddin Abdul Rahman.

The structure would allow BEP to oversee matters related to bumiputra economic agenda including overwriting the authority of certain heads of government agencies if needed.

Poser for used car dealers

For dealers of imported used parts, “D-Day” is just around the corner. Under the NAP, the importation of used parts and components will be prohibited from June 2011. Safety and environmental concerns are the main reasons for this policy.

Tan, a Penang-based used parts dealer, believes this policy will cripple the used car business.
“Thousands of players are involved in the used parts business in the country. This policy will kill us.
“But don't just think about the business owners. What about the employees? In the end, there will be hundreds of thousands of people that will be unemployed,” he says.

Tan adds that the Government should conduct a study on the impact before the policy is implemented.
“Banning used parts would also mean that if you have a year 2000 Toyota, getting new parts for an old vehicle would be difficult.”

Chang, a used parts dealer in Kuala Lumpur, says it is a misconception that used parts are less reliable than new parts.  “Cars break down every day. This can range from a new car of three months to one that's been around for a decade.”
Chang says not everyone can afford new vehicles, adding that many also do not want the hassle of paying a car loan.

“Used parts are also more affordable and contrary to popular belief, last a long time,” he says.
According to an article on insurance web portal Malaysia Insurance Online (MIO), imported used parts and components are actually cheaper than those manufactured locally. It also says imported used commercial vehicles also provide cannibalised parts for the industry.

From the insurance industry perspective, MIO says it is not uncommon for claims personnel to tweak part prices when assessing the claims quantum.
“The tweaking is to put in some second-hand or cannibalised parts as replacement for the damaged ones.
“Those used parts are important in scaling down costs for the industry to contain the ever deteriorating loss ratios.”

MIO adds that ultimately, the insured will benefit from the used parts industry.
“While the facts are such, caution should not be thrown to the wind the escalation in theft of motor vehicles is also the result of increasing demand for cheap cannibalised vehicle parts.”

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