Negative impact expected from continued delay in NAP release

PETALING JAYA: The continued delay in releasing the revised National Automotive Policy (NAP) will cause uncertainty for local assemblers based in the country, therefore negatively impacting the country’s vehicle production outlook, Fitch Solutions Macro Research said in a note today.

“Delays in the release of the updated autos policy will impact the ability of automakers to make long term strategy and investment decisions, such as either upgrading their existing autos production operations to include new emerging drivetrain technologies such as EVs or whether to invest in Malaysia or opt for another country,” it said.

Fitch Solutions is forecasting vehicle production to increase by 3.6% in 2020 to reach 603,974 units over the same period.

“Over our 2020-2029 forecast period, we expect production to achieve an annual growth rate of 2.1%, however, our forecast could change if the uncertainty continues,” it added.

The NAP has been delayed since 2019.

The last revision occurred in 2014 when the government included parameters for energy efficient vehicles (EEVs) which was meant to reduce fuel consumption of locally assembled vehicles.

The revised policy is meant to include the promotion of new concepts in the autos industry such as next-generation vehicles, mobility as a service and Industrial Revolution 4.0.

Meanwhile, Fitch Solutions also said the proposed excise duty increase on locally assembled vehicles is further eroding Malaysia’s position as an investment destination.

“An increase in excise duties would result in higher prices for locally assembled vehicles which we believe puts further strain on the country’s attractiveness as an automotive assembly destination, as higher prices for locally assembled vehicles would dampen demand.

“The increase in the cost of locally assembled vehicles would also render Malaysian-produced vehicles less competitive in the country’s key export markets and especially within the Asean region,” the research unit said.

It also believes Malaysia will face heated competition as automakers will look at other countries within the Asean region for automotive production-related investments, such as Thailand and Indonesia to set up automotive assembly operations especially in EV production.

The Finance Ministry is reportedly working to change the calculation method on the open market value of locally assembled vehicles, and is looking to clamp down on inaccurate reporting on local content levels by automakers in Malaysia.

The increase in excise duties is a measure taken to ensure accurate reporting of each automaker with vehicle assembly operations in the country, and was gazetted on Dec 31, 2019.

source https://www.thesundaily.my/business/negative-impact-expected-from-continued-delay-in-nap-release-JF1979209