End-of-life vehicle policy

Karambir Singh

The ELV needs to be introduced with tax incentives or carry forward tax. Car owners should be entitled to a one-time tax exemption that can be carried forward for the purchase of new vehicles if the old vehicle is scrapped.
– Datuk Armin Baniaz Pahamin, entrepreneur

Are you planning to buy a car? Unless you have a pocket or bank account stuffed full of cash, you’ll most likely need to apply for a car loan.

To get a car loan, you need to navigate through obstacles related to interest rates—these are based on national or foreign made, and whether it’s a new or used car—the loan amount and tenure, reference rates, your credit history and status, fixed or flexible interest rate loans, down payments and margin of financing, guarantors and collateral issues.

A car loan can range from a minimum of one year to a maximum of nine years, depending on your loan amount and also interest rate, your monthly repayments will be bigger for a shorter period.

So after all this, let’s say you get a nine-year loan and having settled it, the government introduces ELV (End-of-Life Vehicle) policy, meaning it’s compulsory to scrap your car. Various proposals have ranged between 10 to 12 years old for the scraping period.

I’m sure all of you would be happy to drive around a new car every few years. However, can we afford a new car on such regular basis?

There various arguments in favour of ELV. The much touted one is on the grounds of safety. Based on research, cars that are 12 years and above have a higher fatality rate when involved in accidents.

It has also been pointed out that an ELV policy would be a big boost to our automotive industry and I’m sure, to the scrap metal merchants as well.

Old cars are also considered to be less environmentally friendly, a significant contributing factor towards smoke pollution.

New cars will also allow car owners to save money on fuel cost as the fuel consumption rate will be better. The cost of maintenance would also be lower as there will be less “wear and tear”.

However good the above reasons are, and I’m sure there are many more advantages that can be given, it’s important to consider other factors, especially the negative socioeconomic impact on our citizens.

Just imagine, you have slogged away for nine years to pay for your car and between one to three years after that, you are forced to get another new car.

This will get you into debt all over again. You will end up being a slave to your continuous cycle of debt repayment.

It has also been acknowledged that on average, our cars are only used for one hour a day. So if this is extrapolated to 10 years, this would work out to about 3,650 hours.

Should we scrap a car after such little use? This would indeed be a waste of our resources, especially when we are being told not to be a wasteful society.

The ELV policy, I think, might be more appropriate for commercial vehicles that have a high rate of usage and a large amount of wear and tear.

The ELV policies have worked mostly in high-income nations that also have low car prices. In Malaysia, it’s the opposite at the moment.

Many people are still on low incomes and our car prices are among the highest in the world due to the rate at which they are taxed during purchase.

Imagine a smallholding farmer in Sarawak, who takes out a loan to buy a pick-up to transport his produce to town centres.

If this farmer is forced to buy a new pick-up every 10 to 12 years, he would never be able to climb out of the poverty trap.

I’m sure many classic car owners, used car dealers and also luxury car owners would not be happy with an ELV policy. Imagine again, saving up and forking out RM2.1 million for a Lamborghini Huracan LP 610-4 and then being forced to scrap it after 10 years.

As it stands, the only major beneficiary of such a policy would be the car manufacturers and tax authorities.

I think as it is, we have been supporting our local car industry with their overpriced cars for far too long. An ELV policy in Malaysia would really be rubbing salt into existing wounds.

Other more friendly policies can be introduced to mitigate the concerns related to safety and pollution.

The introduction of ‘Road Worthiness Test’ after the car is five years old would be reasonable. This type of inspection can be made mandatory to ensure a car is safe to drive for the long term. This system has successfully been introduced in other countries.

Currently, Pusat Pemeriksaan Kenderaan Berkomputer (Puspakom) is the main inspection centre for vehicles throughout Malaysia.

If such a mandatory system was introduced, there would not be enough centres in Malaysia. The government should license more companies to provide such facilities and allow a competitive market for such services.

I would say that, as our nation moves towards a higher income economy, I’m sure those who can afford it will replace their cars on their own accord.

It was reported last year that the National Automotive Policy 2019 would be revealed this month. Let’s see if it proposes the introduction of ELV.

If it does, let us hope our newly-minted Sarawak Minister of Transport will lobby to prevent our people from being burdened with it.

ELV can only be implemented via an amendment to the Road Transport Act 1987, and with the current economic situation, should not even be considered.

If you hear any federal minister (as I’m sure no Sarawak minister would) supporting the ELV policy, it means he or she has become a car salesman.

The views expressed are those of the author and do not necessarily reflect the official policy or position of the New Sarawak Tribune.

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