Let more fuel-efficient cars on Malaysian roads

Thursday August 6, 2009 Let more fuel-efficient cars on Malaysian roads Making a point - By Jagdev Singh Sidhu

FROM Germany to Japan to the United States, the car industry in recent months has received huge amounts of government aid to assist people to trade in their old cars.

Cash was offered to car owners to swap their jalopies for a new, fuel-efficient car, and the economy-stimulating move was a success in the many countries where it was introduced, often lifting car sales during recessionary times.

In Germany, car sales soared as the government gave 2,500 euros to owners who sent their old vehicles to the crusher for a more fuel-efficient car.

In Japan, car buyers were given US$2,500 to trade their petrol cars for next-generation hybrid or electric cars.

Similarly in the United States, owners are given US$3,500 to US$4,500 to scrap their old petrol guzzlers for new fuel-efficient cars. That helped not only to lift sales but saw more compact cars and hybrid vehicles sold.

While these moves helped the industry and economies in those countries, a similar move in Malaysia fizzled out shortly after it started.

The anaemic response to our auto scrapping scheme in Malaysia could be due to the small amount of money being offered, up to RM5,000, which in reality represents a small fraction of the price of a new small car in Germany or the United States where the price of cars is cheaper.

Furthermore, limiting the choice of new cars to Proton and Perodua might not have helped.

Another impediment might have been the long tenure of auto loans, which now has stretched to a mind-boggling 12 years, making it prohibitive for people to send their car to the scrap heap shortly after paying off the finance company.

In fact, the reduction of taxes and duties would have done more to drive up sales.

Granted that the auto-scrapping scheme in Malaysia was not designed to drag auto sales from any deep slump as the drop in car sales in Malaysia was the smallest in this region, the use of it to promote more fuel-efficient cars and reduce public transportation�s reliance on fossil fuels should have been encouraged.

In fact, consumers should have been given a large tax break to buy the next-generation hybrid or electric cars in an effort to get more of such cars on the road.

The reasons and benefits from such a move are plenty.

A steep discount and tax breaks for fuel-efficient cars is necessary as lithium-ion batteries that power such cars are expensive and last for a period that is shorter than the shelf life of such a vehicle.

By having more fuel-efficient or electric cars, the domestic consumption of fuel drops and that will not only delay the so-called doomsday scenario when Malaysia becomes a net importer of fuel but also allows the Government to gain more revenue from the sale of petrol abroad and through the reduction of petrol subsidy.

Conserving fuel consumption domestically would also shield road users from the inevitable grim reality of skyrocketing price of fuel once true economic growth returns and helps put more disposable cash in the pockets of car owners.