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Nikkei Markets

Malaysia considers restricting vehicle imports

Auto trade body criticizes move, flags warranty risk to biodiesel program

Once Malaysia's top carmaker by volume, Proton suffered a steady decline in sales as years of quality issues marred its image.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysia said Monday it plans to study prospects of restricting imports of cars from some countries in a bid to boost local vehicle manufacturing, a proposal that drew swift criticism from the domestic automotive trade body.

The government should liberalize the industry for growth and create level playing field to compete with Thailand and Indonesia, Malaysian Automotive Association's President Aishah Ahmed told reporters. A new national car project would also disrupt the domestic automotive industry, she said.

"It's a very regressive move," Aishah said. "I don't think it is right for the government to stop other cars to be brought into the country."

The comments come after Prime Minister Mahathir Mohamad said earlier Monday that the government seeks to boost local vehicle manufacturing through a new automotive policy but may curb imports from select countries that pose high trade barriers.

"We are too open but we cannot enter their countries if we did not comply with the standards," Mahathir said. "We agree to free trade but there are other restrictions being imposed even with the reduction in taxes."

Potential import restrictions could be in the form of standards, Mahathir said, without elaborating.

Mahathir, a long-time champion of locally-manufactured vehicle, was instrumental in establishing Proton - Malaysia's national car maker - in his previous stint as prime minister of the trade-reliant nation.

Once Malaysia's top carmaker by volume, Proton suffered a steady decline in sales as years of quality issues marred its image. Lack of focus on exports, meanwhile, eroded the competitiveness of its products in global markets.

Ownership of Proton has also changed several times since its inception more than three decades ago and management is now in the hands of China's Zhejiang Geely Holdings which owns 49.9% in the company.

Mahathir, since sweeping to a shock election victory on May 9, has revived a plan to launch a new national car. A revised national automotive policy will include a new national car project, while the government pledges continued support to Proton, Mahathir said.

Meanwhile, MAA flagged difficulty to vouch for fuel quality of the so-called B10 bio-diesel program.

"If it is B10, it is difficult for us to provide warranty," she said. "This is our principals' stand."

Earlier this month, Primary Industries Deputy Minister Shamsul Iskandar Md. Akin said the government would announce implementation of B10 mandate by end of 2018 subject to the approval by the cabinet.

The ministry is in discussions with stakeholders, including the Malaysian Automotive Association, Japan Automobile Manufacturers Association and Malaysian Automotive Institute regarding issues on manufacturer's warranty on vehicles.

The biodiesel program, which aims to blend 10% of palm-based methyl ester with 90% traditional petroleum diesel for sale at retail pumps nationwide, was initially designed in 2013 in-part to cut the Southeast Asian country's swelling palm oil inventory that weighed on prices of the commodity.

However, the program was deferred multiple times due to concerns over potential damage to vehicle's engine that may prompt manufacturers to dishonor their warranty pledges. A steep decline crude oil prices in 2014-15 also dimmed appeal of the mixed-fuel program.

--Gho Chee Yuan and Jason Ng

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