Why has this happened?
News just in that there have been a number of new Approved Permit (AP) applicants in the past few months and under the previous government this was all in process with a strong audit committee in place to make sure that new AP companies were ready to follow the given guidelines to operate the vehicle importing business themselves and not just resell the permits and make money selling ‘paper’.
It has now come to our attention that the Ministry Of Trade And Industry (MITI) has shortlisted and awarded Approved Permits to 9 new companies to import used cars from the United Kingdom and also Japan.
The list of these new AP holders will be revealed very soon by the Ministry (MITI) and they will have to compete with the current AP holders for the shrinking used car market in Malaysia.
With the economy moving southwards due to the COVID-19 pandemic, the used car and reconditioned (AP) car market is shrinking as buyers face uncertain business and job future and the car finance companies take stock of their current non performing car loans and put in place stricter approvals.
One of the many new criteria’s for being a new AP holder is the sales of all cars before the financial year is up and this means if a new AP holder is awarded 60 approved permits as year, they must purchase 60 vehicles, import them into the country, pay the required tax on each car and have them sold to buyers before another year’s allocation is given to them. So, in order to be in business for the coming 2nd year, they need to make sure all their cars are sold in 12 months of doing the business (or in this case, just 9 months due to our lockdown).
Against the established ‘old guard’ AP holders it will turn into a possible price war as established AP holders have the financial strength to offer hefty discounts against new AP holders.
Established AP holders have car showrooms that have been paid for in full. They have land to hold their stock. They have long term connections with dealers in United Kingdom which will give them better prices and even credit facilities.
The new AP holders will have showrooms renovation costs, showroom rents and land rental to hold stocks. They will need credit facilities from the banks (with interest payments running monthly) and they will not be able to cut their margins to compete with the established AP holders.
The end benefactor of this will be Malaysian car buyers who will be able to get better prices and possible freebies like better warranty, after sales if any and higher margin loans. It is going to a ‘war’ that we have front seat tickets right now.
