Bank Negara Malaysia’s new guidelines on responsible financing, which was announced on November 18 last year and became effective in January 1, 2012, hasn’t brought about desired results, it would seem.
The Malaysian Automotive Association has reported a 25% drop in new car sales for January 2012, attributing the cause partly to the restrictions on hire purchase brought about by the new guidelines.
Proton Edar Dealers Association Malaysia (PEDA) has issued a press release, in which it said that the BNM guideline is the second policy that has harmed the automotive industry after the amendments to the Hire Purchase Act last year.
It is calling for the guidelines to be reviewed – it said that the guidelines had severely damaged its sales, with only 30% of applications for loan submissions being approved in January. It is reported that the automotive industry is set to meet BNM tomorrow to seek a review of the guidelines.
PEDA added that the BNM guideline will not only curb and halt the automotive industry’s growth, but will affect vendors, distributors, dealers and sales advisors. It added that the income of more than 4,500 sales advisors in its dealer network has suffered as a result of lost commission earnings.
“The guidelines on responsible financing will only give rise to illegal loan sharks and promote (an) unproductive population,” PEDA president Armin Baniaz Pahamin said in the release.
The association said that when banks are more stringent, it provides a better opportunity for loan sharks to grow, adding that the loan shark industry was already at its prime even before the guideline was introduced. It added that the guidelines do not echo the government’s 10th Malaysia Plan and the government’s vision of the automotive industry, which is the most prominent sector after property.
Prior to the implementation of the guidelines, PEDA said that Proton, car manufacturers and assemblers were already having difficulty in attaining a good economies of scale due to the country’s small population. It said that the guidelines will further shrink its potential buyer’s demographic, and with a smaller market, the fate of more than 300,000 employees in direct and indirect employment within the automotive industry and its support sectors will be affected.
The association stated that it feared the repercussions and impact to the industry if the guideline isn’t reviewed. As it is, it said there are a lot of road bumps that will not only hinder the growth of the sector, but will stop the industry from moving forward, and the least that BNM can do is to encourage healthy competition among bankers to finance buyers and provide a standard procedure of compliance for the public to refer to when buying a car.
© 2012 Paul Tan's Automotive News. All Rights Reserved.
This story originally appeared on Paul Tan's Automotive News on Thu, 23 Feb 12 06:19:45 +0000.
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