Will cars be cheaper in Malaysia in the coming future ?

Kuala Lumpur: The weakening ringgit has already dismantled the belief of the common audience expecting cheaper vehicles. Whereas, the Trans-Pacific Partnership agreement (TPPA) has made the Malaysian government confident that car prices will fall in the next two years.

Read Also: Trans-Pacific Partnership (TPP) agreement might affect the Malaysian car prices!

According to the International Trade and Industry Minister II Datuk Seri Ong Ka Chuan, the Malaysian auto market will see a new dawn of cheaper cars in the next 26 months as the government is trying it's best to placate the automotive industry through various trade agreements, including the Asean Economic Community and the ASEAN Free Trade Agreement with Japan and Australia. The government is believing that these agreements will bring out the competitiveness of the industry players.

Ong said, “All of these (car price reductions), are facilitated in the open market policy. The whole world will explore the free trade areas with three basic principles – movement of goods and services, skilled labour and investment – which will offer competitiveness and they will reduce the car prices definitely,” after officiating at the ASEAN Autoshow 2015 at Mines International Exhibition Convention Centre last week.

The gradual TPPA effect will help to lift the cap on vehicle imports from the US which will surely affect the market mechanism and will allow more global brands competitiveness.

Read Also: Mitsubishi Motors Malaysia to hike vehicle prices

Ong added that “Under the TPPA, cars from America and Canada will come in for 12 years to enjoy the free tax. You cannot leave immediately. We have to participate in this trend to compete in the international market. At least for a while, we will protect the local industry, but after 12 years, you will have a choice of international cars and you cannot stop people coming in,”

On the other side, Mohamed Madani Sahari CEO of the Malaysia Automotive Institute believes that the cars will be cheaper by the start of next year as the car price rationalisation exercise has been in progress since 2014.

He also said that “By 2018, we estimate a 20% to 22% price reduction. As at May this year, car prices have been reduced, on average, by 16.5%. How did we measure this? We monitor the prices model by model, variant by variant and we do not include promotional prices. We only include the reduction of car prices on a permanent basis.”

Datuk Aishah Ahmad, President of Malaysia Automotive Association (MAA) differs from the preceded two statements, she says that car prices will go up in 2016 due to the foreign exchange factor.

However, currently the weakening ringgit is a very difficult time for the global auto players as they are caught between the customer profits and their own. On one hand, they have to keep prices low to maintain sales as per the consumer interests and, on the other hand, raising the cost of imported components is making it a difficult task for them.

UMW Toyota Motor Sdn Bhd, the distributor of Toyota vehicles in Malaysia, was the first to announce the price hike of its vehicles by 4% to 16% across the range, effective January by 2016. Honda Malaysia has confirmed a 2%-3% price increase from the start of next year, while Mitsubishi Motors Malaysia has also announced that it will raise prices for all its models in the first quarter of 2016.

Read Also: Honda Malaysia hints for car prices increase in 2016

When the other leader is favouring TPPA for an expected price fall, Aishah reckons that the TPPA is a matter that is still uncertain. She says, “The TPPA is still in the future and we need to know the details. For the local industry, we have not been officially briefed. Import duty will be reduced for most of the companies in Malaysia but we are not sourcing from North America as we only source from Asean, Japan, Korea and European markets.”

For now we can only hope that the effective government reforms might bring about a change in falling economy which will directly affect the price of automobiles.