Import of used parts to end June 2011
The hot topic for last week was the new National Automotive Policy Review, a so-called ‘facelift’ for the National Automotive Policy that was first born on the 22nd of March 2006.
The NAP review is a disappointing one, with the prices of cars to be pretty much the status quo for a long time to come. In fact, the prices of hybrid cars are sure to go up once the 50% excise duty rebate ends. But there are parts of the NAP that have significant negative impact on us as motorists, one of which is the announcement that the import of used parts will be prohibited from June 2011 onwards.
Car companies and parts manufacturers do not survive on just selling you your car, which is a sum of parts from various OEMs. They also earn a significant portion from the sale of replacement parts, which you will inevitably need as parts are not designed to last forever. Not sure if the word greedy is justifiable but sometimes these new parts can be priced quite exhorbitantly. Which means used parts are very popular and are pretty much key to the sustainability and/or viability of keeping an old car running.
Banning the imports of used parts and the halfcuts which contain them would mean if your City’s CVT transmission dies, you are unable to source a good condition used one from a Honda Fit Aria halfcut that had been scrapped in Japan due to the country’s scrap policies. It means that when my Proton Perdana transmission finally dies and is beyond a refurbishment, a used one sourced from a Mitsubishi Eterna will not be an option – I will have to buy a 2nd hand Proton one or a NEW one, which I probably will not be able to afford as I am not the Perak or Terengganu Mentri Besar(s).
Of course, these situations will not happen right after June 2011 as there is bound to be existing stock in the country, but that will run out sooner or later. And then what? We cannibalise each other’s cars for used parts, whether willingly (scrap) or not (theft)?
And then there is the total disregard for the livelihoods of the chop shop businesses which have been run for decades and suddenly have their main source of income taken away from them. I visited a few chop shops and interviewed their owners over the weekend, curious to see how they were reacting to this piece of bad news.
One chop shop did not even know that such an announcement had been made. Danny of Soon Loi Sdn Bhd in Batu 11 1/2 Cheras said that he had been unaware that the government was planning such a thing and he and his wife was clearly in shock. I felt really bad watching their reaction. At first they were talking normally and keeping their cool but after awhile you could see they were quite emotional about it.
Their chop shop is a family business and has been running since the 70s. Danny is now the 2nd generation, taking over from his parents. He said chop shops have been around since before he was born and did not understand why the government suddenly wanted to stop the import of used parts.
The government’s justifications for this move are ’safety and environmental’ concerns. From my view I see it more as yet another way to discourage us from using our old and hardy classics, instead driving us to buy new budget cars instead of that RM20k Toyota Corolla AE101 which alot of people are much more comfortable driving as a daily driver than a new car. The common sentiment is that old cars tend to last longer and have better plastics than new cars today and in many cases I find that to be true.
According to Danny, the parts in his stock consist of over 80% overseas imports and only about 20% local parts. I asked him what was he going to do when the new rule is implemented. He said he could not do anything but to look for local cars to ‘cut’ instead of getting halfcuts from overseas.
From a consumer perspective this means certain ‘upgrades’ such as fitting a Cortina 4-speed with a 5-speed manual from a Ford Sierra would be impossible as the Sierra was never really sold here. From the chop shop owner’s perspective, business will be A LOT tougher than usual. To quote his wife’s exact words, “Mati loh!”
I tried looking for a more premium chop shop and found Happy Auto Parts in Sungai Besi which specialises in continental parts. This is near the Auto Bavaria Sungai Besi showroom. There were plenty of BMW E34 front clips there, and there was even an E39 pre-facelift front clip. The owner CM Tan also operates a workshop in the same premise so at least he has something to fall back on when his chop shop business runs dry. Being a specialist BMW used parts center, 100% of his inventory are from overseas.
CM Tan says that the business of a chop shop is not easy to do. You have to build your relationship with your overseas suppliers over a long time – this can be years and years. According to Tan, sometimes even when you find some good cars to be clipped, it doesn’t mean the overseas supplier will sell them to you. There are so many chop shops from so many countries fighting for these cars.
You also need to have a trained sharp eye to judge what cars are suitable to be clipped and he claims that with the 1 week warranty that most used parts have, the return rate for a lemon clip can be so high that you can potentially even lose money on it, or just break even.
He likened the government’s new rule to telling medical students that have given their life to training to be a doctor for many many years that they suddenly are banned from practicing medicine. He has been in this business all his life, what else can he do?
It’s really quite unfair, when you consider that in another segment of the industry, Open AP holders have gotten hints of the system being scrapped for many years now. Only when this NAP review was released have the government somewhat put their foot down and said the system will be terminated by 31st December 2015.
That’s over 5 years of lead time for them on top of the many ‘hints’ that they’ve been getting for quite sometime now, and the RM10k per AP to be charged from 2010 onwards was to go to a special Entrepreneurship Fund that will help these ex-Open AP holders diversify into other businesses.
So much lead time for these Open AP holders to move on to other things, and so much help for them to start new businesses (on top of the money they’ve been earning from the APs so far), but on the other side of the spectrum, used parts dealers only get less than 2 years! I asked both CM Tan and Danny what they would be doing now that they’ve learned about the news – would they bring in more inventory so that stocks would last longer while they figure out what to do with their lives?
They feel it is hard for them to make a decision like that as the government and/or relevant ministry has not released any hard details on how and when exactly this used parts import ban would take place.
It remains a small paragraph in a long document for now, but one that will cause them sleepless nights until the picture is made clearer for them.
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