Friday, May 26, 2006

The Malaysian Car Industry. One Step Forward, Two Steps Back.

The Edge reported that the govt has told car companies to get permission from Ministry of Domestic Trade and Consumer Affairs before holding any cheap sales of cars to prevent cheating cases.

This is yet another policy inconsistency the current administration tends to be prone to, of late. On one hand, the govt has rationalised import duties and announced a National Automotive Policy (NAP) to revitalise the Malaysian car industry, but on the other hand they issue instructions like these, which are tantamount to govt price control.

What kind of cheating are they talking about? Who gets cheated when cars are sold at cheap prices? What are the possible benefits or who are the benefactors of measures to maintain high prices? Whichever way we look at it, the consumer loses by having to pay higher prices because of less price competition amongst car companies.

The car industry will also suffer. But that suffering will not be borne equally. The more uncompetitive and unprofitable car companies stand to gain the most from this action - at the expense of the consumers and other car companies, of course. These car companies are the ones which are hurt by the competitive pricing levels currently and are not able (or are unwilling) to respond by lowering prices themselves. Let's count how many companies fit that bill. There's... Proton... errr... Proton.... and... uh, Proton.

Something stinks here, and the stench is awfully familiar.

The article in The Edge is here.

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