The ministry of international trade and industry (MITI) has issued another statement pertaining to the matter of open approved permits (AP). This is a follow-up to an earlier statement it issued on March 13, which announced the implementation of a new open AP policy from January 1 and revealed that 36 new companies had been appointed as AP holders.
Questions have been raised over the latter, not surprising given that one of the main contentions about the implementation of the AP policy in the past has been allegations of abuse in which these APs have been given to a small number of well-connected individuals and companies, which then quickly sold the APs to other parties for a quick profit.
In today’s media statement, which was made by deputy minister Ong Kian Ming, the government said it aims to be fully transparent on the issuance of open APs for vehicles and motorcycles, and that the Pakatan Harapan government was committed to ensuring that only genuine Bumiputera entrepreneurs are able to obtain these APs.
Detailing aspects of the policy as well as the requirements, Ong said there were stringent conditions by which existing AP holders as well as new applicants were evaluated before their APs were issued in 2019. Among these were that the business:
Must be 100% Bumiputera-owned companies based on their registration with the companies commission of Malaysia (CCM).
Must have paid up capital of at least RM1 million.
Must have experience of at least two years in selling and distributing motor vehicles.
Must not have directors / shareholders / management team with shares in other companies holding open APs.
Must have a minimum of five full-time staff in management, marketing and the technical departments.
Must have a suitable showroom and office.
Must have the financial and managerial capabilities to operate a business to sell imported vehicles via open APs.
He added that once a company has been allocated open APs, it must then comply with the additional requirements:
Any change in the equity holdings and the directors of any company must obtain the approval of MITI before this can be executed.
No usage of middle-men or intermediary companies to sell these open AP vehicles.
Opening of new branches to sell vehicles obtained via the open AP must have the approval of MITI.
The vehicles must be displayed or stored in a MITI-approved premise.
The documents for importation (bill of lading / airway bill) must not be more than one month from the date when the company submitted its AP application to MITI. The name of the company in these documents must be the same as the name of the company in the MITI application and approval forms.
The company must produce the import and sales figures as well as the record of inventory to MITI before the 10th of every month.
The APs must be used in the year of approval which is before the 31st of December every year.
The company must prepare a warranty of at least one year and have an agreement with the original equipment manufacturer (OEM) to provide after-sales services.
Ong said that as a result of these stringent application and approval conditions, the ministry only approved 164 out of 282 applications that were submitted. Out of the approved applicants, 128 are existing companies and 36 are companies which previously did not receive any APs and thus termed as “new” companies. He added that out of 109 applications by new companies, only 36 were approved.
On the issue that of there being no limit to the overall number of APs to be released throughout the year, Ong clarified that although there are no longer hard caps on the number of APs which can be issued in one year, there are definitely hard caps on the maximum number of APs which a company can obtain.
He explained that for companies that have not obtained APs in the past and which have a paid up capital of RM1 million, the maximum number of APs for passenger cars that can be obtained is 60 per company. For existing players with a paid up capital of RM2 million, RM3 million, and RM4 million, the maximum number of APs which can be obtained by these companies are 120, 180, and 240 respectively, as listed in the table above.
The rationale of capping the number of APs for companies which have not received APs in the past is to ensure that these companies have the financial and sales capability to sell up to 60 vehicles first in their first year before they can increase their quota of APs in the future, based on their paid-up capital.
Ong added that the total number of open APs issued by the government has not breached the 30,000 mark over the past two years, and this represents only about 4.3% and 5.3% of total passenger car sales in 2017 and 2018 respectively, as highlighted above.
He said that open APs are issued mostly for the higher end of the consumer market segment, where low volumes do not provide enough economies of scale for them to be assembled in Malaysia. With the large majority of passenger cars on the road – including that of foreign brands – being assembled locally, he said open APs have no effect on mass market car prices, given the low numbers.
He added that the localisation of the domestic passenger car market and the accumulation in the stock of luxury cars as a result of slow sales meant that APs are no longer as commercially lucrative as they once were. With a RM10,000 price tag per AP, plus the investment needed for showrooms and paid up capital, only genuine and competitive players can remain in the market.