How Much Would Car Prices Come Down If Excise Duties Were Abolished?

I’ve made no secret of the fact that I’m leery of the notion that cars in Malaysia should be made cheaper. The negative externalities arising from fossil fuel use, which would be exacerbated by cheaper cars, would be a social and public cost that wouldn’t be accounted for in the retail price of cars.

But leaving that aside for the moment, how much should car prices fall if the currently high rate of excise duty levied on the production and sale of cars be reduced or abolished?

It’s not as much as you think.

January 2012 Monetary Conditions

With the next Monetary Policy Committee meeting due exactly one week from today, it’s nice timing to have January 2012 data on hand to give us an idea of what likely moves are in store for monetary policy.

The bottom-line: nowhere fast. I don’t see anything that would prompt BNM to either cut rates or raise them. If anything, I’m starting to think the bias will be towards a rate hike going into the end of the year.

But that’s getting ahead of myself.

4Q 2009 Distributive Trade Report

I’ve never, ever covered this before - I don’t even have the data on hand – but just reading the report suggests that the impression I got from our 4Q GDP numbers were correct i.e. domestic demand went flat to declining in the 4th quarter, and almost all the growth came from the external sector.

The report covers an overall assessment, and a breakdown by sector into wholesale, retail and motor vehicles. While quarter on quarter retails sales rose 0.6%, wholesale trade fell 0.8% and while motor vehicle sales fell 1.6%. In total sales fell 0.4% or -1.6% annualised. The retail sales segment looks good, but growth mainly came from department stores and supermarkets – discounts and pricing power I suspect.

No wonder nobody feels particularly enthused by “recovery”.


Technical Notes:
Distributive Trade 4Q2009 Report by the Department of Statistics