PM: Proton needs to cut car prices to compete
Thursday March 23, 2006
KUALA LUMPUR, Malaysia (AP) - National carmaker Proton will have to reduce prices to counter growing foreign competition after the government announced measures to liberalize Malaysia’s auto industry, the Prime Minister said Thursday.
"The prices of Proton (cars) will unavoidably be reduced. Proton has to compete,’’ Prime Minister Datuk Seri Abdullah Ahmad Badawi told reporters.
The government Thursday cut excise duties on foreign cars and reduced import duties for vehicles made in Southeast Asia from 15 percent to 5 percent under a policy aimed at making Malaysia a regional auto industry hub.
"Proton has to have a price on its products which will be acceptable by the market. This is extremely important, they know it. It is up to the management to decide,’’ Abdullah said.
The tax reduction comes nearly two years ahead of the Jan 1, 2008, deadline for Malaysia to open up its auto industry under a free trade pact between the 10 members of the Association of Southeast Asian Nations, or ASEAN.
Abdullah, who is also finance minister, said Proton won’t be hurt by the tax cuts because it would expand overseas and focus on growing its exports.
"Proton has indicated to me that it has no problems with the national auto policy because it is ready to compete,’’ he said.
"For them to survive, Proton must grow big and be competitive. Right now, it has a very small capacity. There is room to improve.’’
Once the king of Malaysia’s auto sector, Proton has seen its dominance challenged by foreign car makers as tariff barriers that shut them out for decades have been progressively lowered under the ASEAN Free Trade Area.
Its share of the domestic passenger car market dwindled to 41 percent in 2005 from around 60 percent in 2002.
But higher car sales helped Proton to return to the black in the three months ended December after two consecutive quarters of losses.
It has said it planned to tap the large consumer markets in China and India as part of efforts to export 100,000 cars by 2008.
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