Table of Contents Project........................................................ 1 Best Selling Car Brand in Malaysia.............................2 The Top 10 Best Car Brand in Malaysia in 2010..................2 Market structure is Oligopoly..................................4 Malaysian Vehicles Sales January to June 2010..................5 Car Sales Drop in 2009.........................................7 Best selling model in the world................................7 Malaysia car sales to recover in 2010..........................8 MAA Vehicle Sales, Market Share, and Ranking Summary for Passenger cars & Commercial Vehicles in Malaysia for Jan to June 2008.......................................................... 10 PRODUCTION & SALES FOR FEBRUARY 2011..........................12 1. PRODUCTION................................................12 2. SALES.....................................................12 3. Market Performance in February 2011.......................12 The objectives of the NAP.....................................14 NEW POLICIES AND MEASURES IN THE NAP REVIEW...................16 A. MANUFACTURING LICENCE: PROMOTING HIGH IMPACT SEGMENTS.....16 B. TAX/DUTY: PROMOTION OF EXPORTS OF VALUE ADDED PRODUCTS....17 C. TECHNOLOGY: PROMOTING HIGH VALUE AND GREEN TECHNOLOGY.....18 D. SOFT LOANS/GRANTS: MEASURES TO ENHANCE COMPETITIVENESS OF PARTS/COMPONENTS MANUFACTURERS...............................19 E. STANDARDS: EFFORTS FOR INCREASED SAFETY...................19
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Best Selling Car Brand in Malaysia.................................................................................................2
The Top 10 Best Car Brand in Malaysia in 2010............................................................................2
Market structure is Oligopoly..........................................................................................................4
Malaysian Vehicles Sales January to June 2010.............................................................................5
Car Sales Drop in 2009....................................................................................................................7
Best selling model in the world.......................................................................................................7
Malaysia car sales to recover in 2010..............................................................................................8
MAA Vehicle Sales, Market Share, and Ranking Summary for Passenger cars & Commercial Vehicles in Malaysia for Jan to June 2008....................................................................................10
PRODUCTION & SALES FOR FEBRUARY 2011....................................................................12
3. Market Performance in February 2011..................................................................................12
The objectives of the NAP.............................................................................................................14
NEW POLICIES AND MEASURES IN THE NAP REVIEW....................................................16
A. MANUFACTURING LICENCE: PROMOTING HIGH IMPACT SEGMENTS...............16
B. TAX/DUTY: PROMOTION OF EXPORTS OF VALUE ADDED PRODUCTS..............17
C. TECHNOLOGY: PROMOTING HIGH VALUE AND GREEN TECHNOLOGY............18
D. SOFT LOANS/GRANTS: MEASURES TO ENHANCE COMPETITIVENESS OF PARTS/COMPONENTS MANUFACTURERS.......................................................................19
E. STANDARDS: EFFORTS FOR INCREASED SAFETY....................................................19
F. THE APPROVED PERMIT SYSTEM.................................................................................20
G. THE NATIONAL DIMENSION: A STRATEGIC PARTNERSHIP FOR PROTON........20
H. EFFECTIVE DATE..............................................................................................................21
MITI advances the Government of Malaysia’s agenda of liberalisation, paving the way for
a more competitive automotive industry for domestic, regional and global markets
The National Automotive Policy (NAP) was introduced on 22 March 2006 to facilitate the
required transformation and optimal integration of the local automotive industry into regional
and global industry networks within the increasingly liberalised and competitive global
environment. The NAP is the main thrust for the formulation of the strategic directions of the
industry under the Third Industrial Master Plan (IMP3), 2006-2020.
Three and a half years after its introduction, the National Automotive Policy (NAP) has been
reviewed, resulting in new policies that will foster a more competitive market for local and
international companies. In line with the Government of Malaysia’s commitment to liberalisation
and the “People First” concept, the NAP Review provides further benefits for consumers in
terms of safety and environmental protection.
Types of Government Intervention
1. Inform: or persuade consumers/providers/suppliers to act in a certain way.
Publicize health risks (smoking)
2. Regulation: determines how a private activity may be undertaken.
At extreme gov’t can prohibit goods or activities.
Setting standards.
Regulate.
Includes mandates: obliges someone to do something, and (usually, though not
always) pay for it.
Regulation and mandates appeals to legislators
b/c(because) tackles problems without incurring government spending.
Affects spending of those that are regulated e.g. two day hospital days
after delivery.
3. Finance: health care with public funds.
Delivery can still be public.
4. Provide: or deliver goods/ services using publicly-owned facilities and civil service staff.
Usually publicly financed and provided
More typical of developing countries
5. Taxes/subsides on goods e.g. cigarettes
Making Entry Barrier
1- Through establishing National Automotive policy as a road map for developing the
process of manufacturing, exporting and monitoring the national industry performance.
2- Taxes for importing the foreign car and automotive part (CKD)
3- Through using high technology and green technology.
4- Allocating Soft Loans/Grants for enhancing competitiveness of part / component
manufacturers.
5- Set a high level of standard for increasing safety and environmental friendly product
providing as a core competency.
6- Strategic Partnership for hiking their quality and competitive advantage and getting more
market share for avoiding the entry.
7- Providing some key resource in a cheaper price for national companies such as proton.
8- Exempting proton from import duties on CKD kits which lead to 20%-30% cheaper price
of their product
All of the above point will discussed in following of this project.
** Government Intervention: Regulation
The objectives of the NAP (National Automotive Policy)
review were to ensure orderly development as well as long term competitiveness and capability of the domestic automotive industry as a result of market liberalisation;
create a conducive environment to attract new investment and expand existing opportunities;
enhance the competitiveness of the national car manufacturer through strategic partnership;
foster the development of the latest, more sophisticated technology in the domestic automotive industry;
develop high value-added manufacturing activities in niche areas;
enhance Bumiputera participation in the domestic automotive industry;
improve safety standards for consumers and promote environment-friendly opportunities; and
enhance the implementation of current NAP’s policy instruments.
The new policies and measures under the NAP Review are expected to provide significant
contribution to the overall growth of the industry and the country. Emphasis will be given in
attracting investments in high value-added manufacturing activities using latest and high
technology. The opening up of Manufacturing License (ML) for manufacturing and assembling
activities in the selected segments particularly for luxury cars and hybrid/electric vehicles will
encourage new investments and expansion of existing investments in the country. Currently, the
hybrid/electric segment is still very new and has the potential to be promoted and developed in
this region. With the appropriate incentives offered by the Government, Malaysia would be able
to attract OEMs to move their operations into Malaysia. The emphasis on safety and
environment aspects under the NAP Review will ensure the continued development of the
domestic automotive industry. The phasing-out of imported used automotive products and
introduction of mandatory standards for parts and components and standards for fuel and quality
will spur the development of the automotive industry in the long run. As one of the measures to
enhance the competitiveness and ensuring long-term viability of the national car manufacturer.
a strategic partnership between PROTON and a global established OEM will be encouraged.
This partnership has to ensure:
increase in exports and make Malaysia as a production hub for the region;
transfer of latest technology and implementation of R&D activities in Malaysia;
increase in local content and enhancement of development of Bumiputera vendor programme;
increase Bumiputera participation in dealership network; and
PROTON brand name and its domestic market share for specific segments are preserved.
Malaysia is committed in its obligation under ASEAN and WTO. Therefore, the NAP
Review has also taken into consideration Malaysia’s commitments under both ASEAN
and WTO. Malaysia will continue to implement its commitments under FTAs on the
removal and reduction of import duties for automotive products.
In line with Malaysia’s international commitments, the AP system will be terminated as
follows:
Open AP for used vehicles (commercial, passenger and motorcycles) to be terminated by
31 December 2015; and
Franchise AP to be terminated by 31 December 2020.
The termination of AP system by 2015 will provide a clear roadmap and as an interim period for
the AP holders to diversify and venture into other businesses. As announced in the Budget 2010,
each Open AP issued will be charged at RM10,000. A fund will be established from the income
collected and will be used to assist Bumiputera entrepreneurs in undertaking, among others, the
following areas/activities:EMBARGOED, 28 OCTOBER 2009.
Some of the Business Level Strategy:
• securing distributorship/franchise rights and dealership of other makes of vehicles;
• expansion programmes for authorized dealers;
• venturing into other automotive sub-sector or other businesses;
• upgrading show rooms and service centres; and
• participation in international seminars/motor shows/conferences/meetings or trade missions.
NEW POLICIES AND MEASURES IN THE NAP REVIEW
Several new policies and measures, covering licensing, duties, incentives, technology,
environment, safety, standards and regulations are being introduced under the NAP review, with
the aim of fostering a more competitive industry and freer market. The new policies include:
** Government Intervention: Taxes
B. TAX/DUTY: PROMOTION OF EXPORTS OF VALUE ADDED PRODUCTS
I. Tax Exemption on the Value of Increased Exports of Vehicles and Parts/Components
The NAP Review introduces substantially higher tax exemptions for exported goods with a
significant portion of value added in Malaysia. This reflects the country’s goal to expand the
amount and quality of exports. A tax exemption onstatutory income for all sectors is offered
based on the percentage increase in its value added.
New Measures2:
2. Current Measures Tax exemption on statutory income for all sectors is given based on
percentage increase in the value of exports provided the products attain the following value-
added criteria:
- 10 per cent of the value of increased exports is given to manufacturers provided the goods
attain at least 30 per cent value added; and
- 15 per cent of the value of increased exports is given to manufacturers provided the goods
attain at least 50 per cent value added.
• The tax exemption on statutory income for manufacturers in the automotive industry is
enhanced:
- from 10 to 30 per cent of the value of increased exports, provided the goods attain at least 30
per cent value added; and
- from 15 to 50 per cent of the value of increased exports provided that the goods attain at least
50 per cent value added.
II. Import Duty: removal/reduction in compliance with trade agreements
It is MITI’s priority to promote free and prosperous international trade. Under the Free Trade
Agreements (FTAs), Malaysia is committed to gradually remove or reduce its import duty. The
automotive sector will meet the national commitment to the various FTAs. Details on duty
structures are available in the Agreements (please refer to MITI website: www.miti.gov.my).
III. Import and Excise Duty for Complete Built-Up (CBU) and Complete Knocked-Down
(CKD)
The rates of import duty (Most Favoured Nation-MFN) and excise duty for CBU and CKD
vehicles are maintained (Annex).
C. TECHNOLOGY: PROMOTING HIGH VALUE AND GREEN TECHNOLOGY
I. Better Incentives for Critical and High Value-added Parts and Components Production
Promoting the production of critical and high value-added parts and components is a crucial
scheme to increase the country’s human and technological capital and contribute to long-term
development goals. Companies manufacturing transmission systems, brake systems, airbag
systems and steering systems are eligible for better fiscal incentives i.e Pioneer Status (PS) of
100 per cent fiscal deduction for 10 years or Investment Tax Allowance (ITA) of 100 per cent
for five years.
II. Promote Hybrid and Electric Vehicles and Development of Related Infrastructure
Investing in the development of hybrid and electric vehicles bears the benefits of the acquisition
of new, high end. technology and the promotion of a more sustainable energy policy. A
comprehensive mix of fiscal incentives, duty exemptions and customised training and R&D
grants was included in the NAP Review to maximise returns on investment.
3 Current measures Under the 2009 Budget, imports of CBU hybrid cars are:
exempted from import duty; and
granted 50 per cent excise duty exemption.
Both exemptions are given for a period of 2 years until 31 December 2010 to promote local
assembly.
Currently, the infrastructure for electric vehicles is not available in the country.
• Investments in the assembly or manufacture of hybrid and electric vehicles will be
granted:
- 100 per cent ITA or PS for a period of 10 years;
- customised training and R&D grants in addition to the existing grants;
- 50 per cent exemption on excise duty for locally assembled/manufactured vehicles or provision
of grant under the Industrial Adjustment Fund (IAF);
- PS of 100 per cent for 10 years or ITA of 100 per cent for 5 years for manufacture of selected
critical components supporting hybrid and electric vehicles, such as:
o electric motors;
o electric batteries;
o Battery Management System;
o inverters;
o electric air conditioning;
o air compressors;
- additional attractive, customised incentives will be considered based on proposed activities.
• The Ministry of Energy, Green Technology and Water will draw up a roadmap to develop the
infrastructure for electric vehicles.
D. SOFT LOANS/GRANTS: MEASURES TO ENHANCE COMPETITIVENESS OF PARTS/COMPONENTS MANUFACTURERS
To improve competitiveness of parts and component manufacturers and to enhance their
contribution to the automotive industry and economy, the Automotive Development Fund (ADF)
and Industrial Adjustment Fund (IAF) will be continued.
E. STANDARDS: EFFORTS FOR INCREASED SAFETY
I. Full Implementation of Vehicle Type Approval (VTA)
Under the current NAP, the Road Transport Department (RTD) was assigned to implement the
VTA project, which is yet to be established. Under the NAP Review, the Ministry of Transport
(MOT) will accord priority in the 10th Malaysia Plan for full establishment of the VTA
standards and testing facilities.
II. Gradual Introduction and Enforcement of Mandatory Standards for Parts and
Components
Due to the lack of a specific regulatory body responsible in enforcing standards, there is
insufficient coordination in the enforcement of mandatory requirements for parts and
components.
Under the NAP Review, the Ministry of Science, Technology and Innovation will coordinate and
formulate a roadmap for the introduction and enforcement of mandatory standards for
automotive products.
III. Gradual Phase-out of Imported Used Parts and Components
Safety and environmental concerns rose from the practice of importing used parts and
components without any restrictions or mandatory tests. The NAP Review is introducing a
mechanism to prohibit imports of used parts and components, effective from June 2011.
IV. Gradual Phase-out of Imported Used Commercial Vehicles
Currently, imports Vehicles
Currently, imports of used commercial vehicles are allowed. Under the new policy, imports of
used commercial vehicles will be prohibited, effective from 1 January 2016 in line with:
• the gradual phase-out of imports of used parts/components; and
• the termination of AP system for used vehicles.
V. Clear Roadmap for the Implementation of Fuel Standards
Since September 2009, EURO 2M specification for petrol and diesel has been implemented. The
Government has now set a clear target of implementing EURO 4M specification for petrol and
diesel by 2011. The Ministry of Natural Resources and Environment will establish a roadmap for
fuel standards and quality..
VI. Gradual Introduction of Vehicle End of Life Policy
At present, there are 2.7 million passenger vehicles of 10 years or older on the road. Compared to
other countries, Malaysia presents a very low vehicle scrap rate and relatively high average
vehicle age. As a first step towards the implementation of a full Vehicle End of Life (ELV)
Policy, the NAP Review introduces mandatory annual inspections as a requirement for road tax
renewal for all vehicles aged 15 years or older. The Ministry of Transport will formulate a
roadmap to reach full implementation of the ELV policy.
F. THE NATIONAL DIMENSION: A STRATEGIC PARTNERSHIP FOR PROTON
A new strategic partnership between PROTON and a globally established Original Equipment
Manufacturer (OEM) will be established to enhance PROTON’s competitiveness in a global
market and its long term viability.
G. EFFECTIVE DATE
The new policies and measures will be effective from 1 January 2010. MITI will coordinate
with the relevant ministries and government agencies on the follow-up actions for the
implementation of the NAP Review.
Before discussion about pricing strategy in automotive industry in Malaysia it could be helpful if
we know a little more about their type:
Types of Pricing Strategies
An organisation can adopt a number of pricing strategies. The pricing strategies are based much
on what objectives the company has set itself to achieve.
Penetration pricing: Here the organisation sets a low price to increase sales and market share.
Once market share has been captured the firm may well then increase their price.
Skimming pricing: The organisation sets an initial high price and then slowly lowers the price
to make the product available to a wider market. The objective is to skim profits of the market
layer by layer.(price discrimination for minimizing the consumer surplus)
Competition pricing: Setting a price in comparison with competitors. Really a firm has three
options and these are to price lower, price the same or price higher.
Product Line Pricing: Pricing different products within the same product range at different
price points. An example would be a automobile manufacturer offering different car with
different features at different prices eg A Van and sedan model. The greater the features and the
benefit obtained the greater the consumer will pay. This form of price discrimination assists the
company in maximising turnover and profits.
Bundle Pricing: The organisation bundles a group of products at a reduced price. Common
methods are buy one and get one free promotions or BOGOF's as they are now known. Within
the UK some firms are now moving into the realms of buy one get two free can we call this
BOGTF i wonder?
Psychological pricing: The seller here will consider the psychology of price and the positioning
of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead
of $200. The reason why this methods work, is because buyers will still say they purchased their
product under £200 pounds or dollars, even thought it was a pound or dollar away. My favourite
pricing strategy.
Premium pricing: The price set is high to reflect the exclusiveness of the product. An example
of products using this strategy would be Harrods, first class airline services, Porsche etc.
Optional pricing: The organisation sells optional extras along with the product to maximise its
turnover. This strategy is used commonly within the car industry as it found out when purchasing
my car.
Cost Based Pricing: The firms takes into account the cost of production and distribution, they
then decide on a mark up which they would like for profit to come to their final pricing decision.
Cost Plus Pricing: Here the firm add a percentage to costs as profit margin to come to their final
pricing decisions. For example it may cost £100 to produce a widget and the firm add 20% as a
profit margin so the selling price would be £120.00
Pricing Strategy in Automotive industry in Malaysia:
Like any other industry in automotive industry the pricing strategy is a combination of
Competition pricing: (base of the competitor price) and Product Line Pricing (base of the cos
of production) or most common strategy is Optional pricing in which manufacturer selling their
product base of the option of customers ,or Cost Based Pricing,in which companies decided
about their proft and markup and selling price.
Some of the Announcement leads to changing the price:
In 20 November 2007, Proton announced that talks regarding any partnership with Volkswagen
Group had ended with immediate effect, citing improving sales over the year, a favorable export
outlook, and confidence in management turning around the company without external
collaboration. This unexpected announcement resulted in a 19% overnight drop in Proton's
share price to their lowest value in seven years, due to the market's perceived uncertainty about
the future financial viability of the company in an increasingly competitive local and world
market. Proton did however state that they may resume talks about collaborating with other
manufacturers at later unspecified dates.
Appendix:
DUTIES & TAXES ON MOTOR VEHICLES
A) Motor Cars (Including Station Wagons, Sports Cars and Racing Cars)
IMPORT DUTY
LOCAL TAXES
CBU CKD MSP CBU & CKD
EngineCapacity (cc)
MFNASEAN
CEPTMFN
ASEAN
CEPTMFN
ASEAN
CEPT
ExciseDuties
Sales Tax
< 1,800 30% 0% 10% 0% 10% n.a 75% 10%
1,800 - 1,999
30% 0% 10% 0% 10% n.a 80% 10%
2,000 - 2,499
30% 0% 10% 0% 10% n.a 90% 10%
Above 2,500
30% 0% 10% 0% 10% n.a 105% 10%
Summary of Sales & Production Data
SUMMARY OF NEW PASSENGER & COMMERCIAL VEHICLES PRODUCED AND REGISTERED IN MALAYSIA FOR THE YEAR 1980 TO YTD DECEMBER 2010
YearPassenger
CarsCommercial
Vehicles4x4
Vehicles Total Vehicles
1980 80,420 16,842 - 97,262
1985 63,857 26,742 4,400 94,999
1990 106,454 51,420 7,987 165,861
1995 224,991 47,235 13,566 285,792
2000 282,103 33,732 27,338 343,173
2005 416,692 97,820 37,804 552,316
2006 366,738 90,471 33,559 490,768
2007 442,885 44,291 - 487,176
2008 497,459 50,656 - 548,115
2009 486,342 50,563 - 536,905
2010 543,594 61,562 - 605,156
Note:(i)Passenger Vehicle industry reclassified in January 2007 and includes
all passenger carrying vehicles.i.e. Passenger Cars, 4WD/SUV, Window Van and MPV models.
(ii)Commercial Vehicles also reclassified on 1 January 2007 and includes Trucks, Prime Movers, Pick-up, Panel Vans, Bus & Others.
SUMMARY OF PASSENGER & COMMERCIAL VEHICLES PRODUCED AND ASSEMBLED IN MALAYSIA FOR THE YEAR 1980 TO YTD DECEMBER 2010
YearPassenger
CarsCommercial
Vehicles4x4
Vehicles Total Vehicles
1980 80,422 23,805 - 104,227
1985 69,769 37,261 - 107,030
1990 116,526 63,181 11,873 191,580
1995 231,280 45,805 11,253 288,338
2000 295,318 36,642 27,235 359,195
2005 422,225 95,662 45,623 563,510
2006 377,952 96,545 28,551 503,048
2007 403,245 38,433 - 441,678
2008 484,512 46,298 - 530,810
2009 447,002 42,267 - 489,269
2010 522,568 45,147 - 567,715
Note: (i)Passenger Vehicle industry reclassified in January 2007 and includes
all passenger carrying vehiclesi.e. Passenger Cars, 4WD/SUV, Window Van and MPV models.
(ii)Commercial Vehicles also reclassified on 1 January 2007 and includes Trucks, Prime Movers, Pick-up, Panel Vans, Bus & Others.
References:
1- MAA, M. A. (2011, March 21). PRODUCTION & SALES FOR FEBRUARY 2011 (Press Release). Retrieved 4 14, 2011, from maa.org.my: http://www.maa.org.my/pdf/PressReleaseforfeb2011.pdf
2- Malaysian Automotive Association (MAA). (2011, March 21). PRODUCTION & SALES FOR FEBRUARY 2011 (Press Release). Retrieved 4 14, 2011, from maa.org.my: http://www.maa.org.my/pdf/PressReleaseforfeb2011.pdf
3- Malaysian Automotive Association. (2008). DUTIES & TAXES ON MOTOR VEHICLES. Retrieved 4 14, 2011, from maa.org.my: http://www.maa.org.my/info_duty.htm
4- Malaysian Automotive Association. (2008). Summary of Sales & Production Data. Retrieved 4 14, 2011, from maa.org.my: http://www.maa.org.my/info_duty.htm
5- Review of National Automotive Policy. (2009, October 28). Ministry Of International Trade and Industry. Retrieved 4 14, 2011, from maa.org.my: http://www.maa.org.my/pdf/MEDIA_RELEASE_NAP_Media_281009.pdf
Project
Type: Group Project (three in a group)
Topic: Consider any one of the industries in Malaysia and analysis the market structure, market
power, and its pricing strategies and critically examine entry barriers in the industry.