Wednesday, July 25, 2012

Slashing car taxes may even help the country

Every time I was reading on affordability index on cars in US, their basic rule is not to buy a car which is more than 6 months a person's income. If that man's income per month is USD4,000, he can afford a Camry based on what that index is saying.

If I want to calculate based on Malaysian income per capita which we are at the current number of RM28,000, we're way off the chart - of course we are comparing against US here. A new MyVI (please, don't mention foreign brands to me) already costs something like RM50 - RM55k - Two years average income per capita, that is.

Now the idea of slashing car taxes is going to be a very popular idea for sure, but can we do it as it may affect government's revenue, some may say. I do not think we can model this until the actual implementation is taking place, but Think along these lines:

  1. There's a higher turnover for new cars, hence the absolute amount of earned taxes may not reduce by that far. Government do not earn (much) from the second hand market. If cars are affordable to more people, perhaps (I am sure) there are a smaller market for second hand cars and definitely a larger market for new car sales. Car scrapping industry may just be kick-started;
  2. Disposable income will definitely improve - imagine the wonders that can happen from here - nothing beats giving money to the people on the streets in terms of recycling the cash;
  3. More cars sold means more income to the sales people, distributors - again more money to people on the streets;
  4. Less breakdown on the roads, and perhaps even lesser jams. Some may say more cars means more jams - think again;
  5. More cars means more pollution, yes - but I did not recommend reduction of tolls. In fact, more new cars may mean less pollution per car;
  6. I have to really promote reduction of subsidies for petrol though as this is not right;
  7. Other means of taxes on cars: road tax, automotive components maybe hence government may not lose much here;
  8. Lesser APs means lesser illicit monies transferred out of the country??? Hello! APs are never right ok, so is illicit money transfer;
  9. A more dynamic automotive industry in Malaysia - imagine what can really happen here.
If slashing taxes for cars really happen, I will re-rate (positively) all automotive assemblers in Malaysia except for perhaps DRB-Hicom or maybe DRB may even get re-rated as they do assemblies and sales for Honda and other marques? That has to be really studied in-depth though as one brand may just be scrapped (almost, as I heard the news VW is interested again?).

But we know for sure that for more than 25 years we have really suffered under the protect "local cars" scheme. I am just giving up as you know who is being protected - yet again!

1 comment:

khengsiong said...

Yes, slash car taxes, but also eliminate petrol subsidies. We drive on weekend, but use public transport whenever possible on weekdays.

Of course, we need better public transportation in this country...