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Auto industry wary of Malaysian free trade deal

Duty free: Australian trade minister Craig Emerson (right) shakes on the free trade agreement with his Malaysian counterpart, Mustapa Mohamed.

Proton happy with zero tariff, but Aussie car companies in no rush for Malay exports

23 May 2012

AUSTRALIA’S automotive industry is not holding its breath for a sudden increase in car and parts exports to Malaysia as a result of a new Malaysia-Australia Free Trade Agreement (MAFTA) that was signed in Kuala Lumpur this week.

While Malaysian car-maker Proton is looking forward to a five per cent reduction in import tariffs on cars shipped into Australia from January 1, 2013, Australian car-makers are privately saying non-tariff barriers that thwart a level playing field for importers against the local car-makers in Malaysia remain an issue.

A similar situation exists with Thailand, which has become Australia’s third-largest source of imported vehicles since a similar FTA was signed with that country in 2005, while vehicle exports in the opposite direction remain minimal.

MAFTA – signed by Australian trade minister Craig Emerson and his Malaysian counterpart on Tuesday – will remove Malaysian tariffs on Australian-built large cars with engines above 2.0-litres from January 1.

Similar tariffs on cars with engines below 2.0 litres will be phased out by 2016, while restrictions on import volumes – so-called quantitative restrictions – will also be lifted.

Neither GM Holden nor Ford – makers of Australia’s Commodore and Falcon large cars and derivatives such as the Ford Territory – have any immediate plans to export to Malaysia.

The Australian auto industry’s peak body, the Federal Chamber of Automotive Industries, released a statement congratulating Mr Emerson on the deal.

However, the unattributed statement indicated that more work needed to be done, saying: “The FCAI looks forward to working with representatives of the Malaysian and Australian governments to further strengthening MAFTA through the ongoing Automotive Industry Dialogue process.”

 center imageLeft: Proton Cars Australia managing director John Startari.

This process involves regular meetings between the two countries to discuss issues that arise on automotive trade on both sides.

From the Australian perspective, those issues are sure to include Malaysian impediments to imported vehicles, such as special excises and delays on finance approval.

In the short term, automotive researchers and parts-makers might be a major beneficiary of the FTA deal, which has been under discussion since 2005.

Chief executive of the Federation of Automotive Products Manufacturers, Richard Reilly, welcomed the development, telling GoAuto: “It is all moving in the right direction.”

However, he also was cautious about the extent of the benefits to the overall industry, saying Australia’s record on free trade agreements was not great.

“The issue we are wary of is the non-tariff barriers,” he said.

Mr Reilly applauded the agreement to set up an on-going auto industry dialogue, saying it would be a good forum to discuss any issues.

He said he would like to see a similar dialogue between the automotive industries in Australia and Thailand.

The government-backed Automotive Co-operative Research Centre (AutoCRC) says MAFTA will strengthen its collaboration with the Malaysian Automotive Institute (MAI).

AutoCRC general manager Ian Christensen said the FTA created a huge opportunity for the Australian automotive industry to expand its regional engagement.

Key research areas such as lightweight composite materials, virtual engineering tools, alternative fuel powertrains, energy storage systems and improved energy consumption and safety will be a focus of the collaboration.

The MAI is already a contributor to AutoCRC research, while the Malaysian organisation’s CEO, Madani Sahari, is an AutoCRC board member.

The most obvious beneficiary of MAFTA is Proton Cars Australia, which imports its line of Malaysian-made cars into Australia.

PCA managing director John Startari told GoAuto the removal of the five per cent import duty on Proton’s range was a welcome development, putting Proton on an equal footing with Thai manufacturers that also import vehicles duty free.

He said the MAFTA would also cut red tape and various costs incurred by processes such as placing cars into bond storage, which would also help his company.

“We have been lobbying for this for some time,” said Mr Startari.

Proton has been one of the smaller players in the Australian market, selling just 379 vehicles so far this year.

However, the company is preparing to launch a new range of models designed for western markets, starting with the Preve small car in August.

Currently, Proton is the only Malaysian car manufacturer exporting to Australia, but other companies such as Honda could be tempted to follow.

As GoAuto reported recently, Honda is exploring the possibility of expanding its manufacturing operation in Malaysia to produce a vehicle for export through Asia.

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