FW: MY Automotive (POSITIVE) - Our thoughts on a small ELV progress

 

 

Good morning,

 

MY Automotive (POSITIVE) – Some progress on a long-awaited ELV policy?

• A major catalyst to the sector, if it materializes… In a recent news article, Transport Minister Datuk Seri Liow Tiong Lai said that a study of vehicles lifespan in the country is now in final stage. This could eventually bring forth the long-awaited End of Life Vehicle (ELV) policy which could offer incentives for owners to change road-unworthy old cars (beyond a certain age) for new ones. While full-implementation of the ELV policy is unlikely for now, we laud this proposal for it will enhance road safety as well as the sustainability of the auto sector.
• Ensuring the sustainability of the auto sector. We estimate that about a quarter of the 13.3m private passenger cars on the road (as of Jun 2017) are more than 10 years of age (~3m cars); these are cars that should be tested for its road worthiness in order to ensure public safety. A small-scale scrapping scheme, the Proton Xchange Programme, conducted by Proton back in Mar 2009, was notable in that over 25k applications were recorded in a short nine-month period; the programme was discontinued as allocated funds were exhausted. We believe that the full implementation of the ELV policy (for both passenger and commercial cars) could boost TIV/TIP in the immediate 3-5 years while ensuring the long-term sustainability in auto demand and most importantly, road safety. 
• Insufficient inspection points must be tackled. The ELV policy was first coined following the introduction of a voluntary inspection for cars, in the 2014 National Automotive Policy. In order to ensure proper implementation the ELV policy, 450 inspection centres are required to first enable mandatory inspection for cars beyond a certain age. However, there are currently only 55 computerized vehicle inspection centres nationwide operated by Puspakom. Unless there are sufficient centres, it may make more commercial sense, in our opinion, if the ELV policy was first implemented on commercial vehicles (10% of total TIV), in light of recent fatal accidents involving older trucks and buses.
• Full ELV implementation beyond reach for now. Limited still by inspection centres to carry out mandatory inspection on cars, we believe that the full-implementation ELV policy may only materialize in 2-3 years' time. As and when it is announced, the national marques (i.e. Proton and Perodua) would likely be the prime beneficiary of this move due to their lion's share of the mass-market A/B-segment models.