Mega projects can be good for business, says used-car group

Annual sales of used cars which used to be in excess of 300,000 units, dropped by 5% in 2018 and may drop a further 5% according to the Federation of Motor and Credit Companies (FMC).

PUCHONG: An association of used car dealers is hoping that Putrajaya will continue with mega projects that stimulate the economy and thereby help its 3,000-odd members improve their sales performance.

Annual sales, which used to be in excess of 300,000 units, dropped by 5% in 2018 and may drop a further 5% when the figures for 2019 are collected, according to Khoo Kah Jin, secretary-general of the Federation of Motor and Credit Companies (FMC).

“We hope the government can create activities for the economy,” he told FMT, adding that he believed some mega projects would bring about such activities.

He welcomed the continuation of projects like the East Coast Rail Link, saying these would have spillover effects on the economy.

The industry’s definition of “used cars” includes pre-owned passenger vehicles and commercial lorries. Reconditioned cars are considered new cars.

Khoo Kah Kin, secretary-general of FMC.

Some FMC members sell reconditioned cars as well. Khoo said the business in such cars was also not as lucrative as it used to be.

Among the factors affecting sales, he said, were the rising cost of living and the difficulty of getting bank loans encountered by potential buyers with low or middle-level incomes.

“Because of this, they may have to take loans from credit companies, which are mushrooming,” he said. “And that’s the sad part because credit companies usually charge higher interest rates, between 8% to 10%. Banks usually charge half that rate.”

He said dealers were also trying to cope with rising costs by selling cars online and reducing the size of showrooms. Some dealers were sharing showrooms, he added.

Khoo also said he hoped the government would allow Approved Permit (AP) holders, who are Bumiputeras, to appoint non-Bumiputera dealers.

In the past, some AP holders were known to have sold vehicles to non-Bumiputera dealers, but the government has tightened controls to ensure that the Bumiputeras sell directly to the end buyers.

“We are okay with APs for Bumiputeras, but we feel the government should open up the market and authorise AP holders to appoint non-Bumiputeras to sell the cars,” Khoo said. “This would be similar to franchisers appointing their own dealers to sell new cars.

“It is a win-win. We buy from the AP holders so they are guaranteed to earn an income and they get to work with the dealers they want. It’s good for business and good for customers.”

Because of the strict controls, he added, many FMC members who used to sell reconditioned cars had to stop doing so and sell high end used cars instead.

“This affects AP holders who cannot move their stock,” he said.

He suggested a bidding system for APs confined to the Bumiputera community so that those believing they could sell more cars could bid for more APs.

He said this would ensure greater competition and better prices for end buyers.