KUALA LUMPUR, Jan 21 — Used car dealers are bracing for the government’s plan to lower car prices by up to a third over next five years, but believe the move will ultimately lead to a larger market for vehicles.

Saying that falling prices were inevitable with the new announcements, Federation of Motor and Credit Company Associations of Malaysia (FMCCAM) warned, however, that some sellers could succumb under the pressure of lower value for second-hand cars.

“Used car pricing and value are based on three main factors, which are new car pricing, demand and supply, and the popularity of a model. But the main factor is new car pricing,” FMCCAM president Datuk Tony Kor told The Malay Mail Online when contacted yesterday.

Kor said that drops in new car prices would spill over to the used car market, which could be a concern for dealers with high stock-holding.

“Luckily it will spread over five years, so at least the impact is not so bad. But we have to be very careful with our inventory, and we have to encourage our members to try not to hold on to their inventory too long,” he said.



The FMCCAM represents some 5,000 used car dealers nationwide, who have a collective inventory of some 120,000 vehicles for sale.



When unveiling the National Automotive Policy 2014 yesterday, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the Barisan Nasional government remains committed to its Election 2013 pledge to reduce car prices by up to 30 per cent within five years.



Although sparse with details on how Putrajaya intends to achieve that goal, he said that it would hinge on liberalising and increasing competition in the automotive industry through a Car Price Reduction Framework.



Despite the increased risk faced by used car dealers, Kor said they are optimistic of the future beyond the five-year “transition period” that the local automotive industry is going through.



”Eventually in the long term, if pricing is reduced then more people can afford to buy cars, which means the market will be bigger.



”But during this five-year period, we have to work very carefully. We can’t keep too much inventory, otherwise when prices change, we will face losses... the risk factor is there,” he said.

Yesterday, Mustapa also said Putrajaya will not yet reduce excise duties for vehicle sales as it could not afford to do so now, but may consider lowering this once the country’s finances improved.