NAP 2014 Announced: More Questions Than Answers

"Unbelievable," was the comment of a vice-president of a European car company as he walked out of this evening's briefing of the National Automotive Policy (NAP) 2014. The automotive industry captain was visibly frustrated at the lack of clear information from the briefing.

*VIDEO: NAP Press Conference 2014*

The only materials given out during the briefing were a set of presentation decks and a seven-page media statement.

A detailed policy document, available only in Bahasa Malaysia, was not available to many attendees as the organizer had not printed sufficient copies to be given out. No effort was made to distribute a softcopy version of the document.

As correctly predicted in our earlier story previewing NAP 2014, the latest NAP is leaving more questions than answers.

If NAP 2014 is aimed at reinvigorating the automotive sector, then it is definitely off to a very bad start. Leaders of some of the largest car companies in the world were seen walking around asking where they could get a copy of the policy document.

The head of marketing of another Japanese car company told us that he can't make any comment for now as he is still unclear about many things. "My principals in Japan will be asking me for details of the policy, which is going to be difficult for me to answer. I can only forward them whatever that we have now," he said, explaining he needs to get a hold of a copy of the policy document and read it in detail before he is able to comment on it.

Kai Schlickum, the vice-president of Mercedes-Benz Malaysia was visibly concerned when Minister of International Trade and Industry (MITI) Datuk Seri Mustapa Mohamed declined to provide a clear answer as to whether Open APs and Franchise APs will be terminated by 31 December 2015 and 31 December 2020 respectively, as outlined in the previous NAP 2009.

"The issue is more complex than what we initially thought," said Mustapa. He added that an announcement on the matter will be made after Chinese New Year.

Mustapa explained that the government still needs to do an in-depth study on the impact that terminating APs will have on Bumiputera participation in the industry.

Schlickum wanted to know if manufacturers will be consulted in this review, to which the Minister answered yes.

The minister stressed that the government is not backtracking from its earlier plan to terminate APs, but needs to do more studies on the matter. At the same time the minister stopped short of giving a clear confirmation that Open APs will be terminated as planned.

For those who are familiar with the local automotive industry, MITI's response is not surprising. Back in July 2013, we have been saying that Open APs are likely to remain beyond 2015. Read our earlier story "Malaysia’s Open-AP System Likely To Remain Beyond 2015."

On the often reported subject of incentives to promote local assembly of Energy Efficient Vehicles (EEV), MITI has finally revealed the required standards to qualify for EEV incentives (table below).

The fuel economy figure is supposed to be based on the combined cycle UNECE R101 standard, which is similar to the New European Driving cycle.

Still, some manufacturers are doubtful. A representative from BMW Group Malaysia said "Without seeing the detailed policy document, we cannot be sure that the incentive applies to vehicles of all engine types, including diesel."

MITI has set aside a fund worth about RM2.06 billion to qualified manufacturers. Out of this, RM 1.89 billion are soft loans while the remaining RM175 million are grants for human capital development and Bumiputera development. The fund will be dispersed out to qualified companies between now until 2020.

The specific criteria used in deciding the quantum of incentives given out remains a vague. "It is a customised incentive, to be discussed between the government and the manufacturer," said Mustapa.

The non-transparent manner in which incentives are given is a major concern for many industry captains that we speak to.

BMW Group Malaysia's CEO Dr Gerhard Pils commented "We believe that it is important for further transparency and discussions to be conducted between MAI, MITI and the local automotive industry players to clarify what the actual exemptions to EEV vehicles assembled in Malaysia will be as only from there will firm business decisions regarding the market be made. These discussions should be conducted swiftly and carefully to ensure that both the automakers as well as the public can benefit mutually from the new policies moving forward."

Meanwhile, Tetsuya Oda, CEO of Mitsubishi Motors Malaysia said "At this moment we need more clarification from the government."

"Details for EEV incentives are not very clear," he added. It should be noted that Mitsubishi Motors was the first company to mass produce an electric car (Nissan was first to sell a mass produced electric to the public) when the Mitsubishi i-MiEV was offered for sale to fleet buyers in 2009 in Japan.

Mitsubishi Motors Malaysia is also the first company to launch an electric car to Malaysia and was instrumental in assisting the Malaysian Road Transport Department and Malaysian Customs in establishing the necessary processes to import and register an electric car. 

Mustapa also said that unlike Thailand's Eco Car incentive, there are no pre-conditions in minimum investment or export volume.

A representative from Nissan also expressed his confusion on how manufacturers should go about getting the required fuel-economy data. Certain Nissan models sold in Malaysia like the Almera and Grand Livina, are fitted with an engine and transmission that is unique to Malaysia.

As Malaysia's vehicle homologation process does not define any specific methodology to measure fuel economy, car manufacturers do not do fuel- economy testing of any type.

To qualify for EEV incentives, manufacturers have to submit a test result conducted in a certified independent laboratory. There are no such labs in Malaysia.

For now, incentives will only be given out based on the vehicle's kerb weight and fuel economy. A carbon-emission standard, which was also included in the proposal, has been deferred for now as Malaysia still lacks a suitably high-grade fuel.

On the subject of introduction of Euro 4M quality fuel, there is still no clear commitment from the government to introduce this in 2015. Mustapa explained that an announcement will be made on this matter in two months time.

BMW's Dr. Gerhard Pils commented that his company hopes to see a clear decision from the government soon regarding implemnetation of Euro 4 standard fuel.

"With many of our neighbours in ASEAN, not to mention the most vibrant automotive markets in the world, already working with EURO 4 or better fuel standards today, the improvement of Malaysia’s fuel standards will be an important factor in determining the viability of Malaysia as an automotive exporter, and be very critical in allowing us to achieve an export volume of RM 5 billion by the year 2020 as outlined in this review of the NAP," he said.

Full excise and import duty exemptions for hybrid vehicles below 2,000cc has been discontinued as of 31-December 2013. The new duty exemption is only limited for locally-assembled hybrid and electric vehicle (EV) models. The duty exemption for locally-assembled hybrids will continue until 31-December 2015 for hybrid models, and 31-December 2017 for EV models.

As for fully-imported hybrid models, they will now be taxed at a normal rate, depending on their engine capacity. 

As for promises of lowering car prices, Mustapa again stressed that there will be no changes to the current excise duty structure, adding that the country's fiscal condition makes it difficult to do this. He revealed that excise duties alone contributed RM7.3 billion to the treasury in 2013.

Instead, lowering of car prices will come from promoting competition.

Also, the controversial vehicle scrappage has been officially scrapped. "The timing is not right to introduce this for now," said Mustapa. Vehicle inspection will still remain as a voluntary process.

Check back here again tomorrow as we dissect the finer details of NAP 2014, once we get a hold of the policy document.