eco 6 recovered)

8/7/2019 Eco 6 Recovered)

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Table of Contents

Project ...................................................................................................................................... 26

Best Selling Car Brand in Malaysia ............................................................................................. 2

The Top 10 Best Car Brand in Malaysia in 2010 ......................................................................... 2

Market structure is Oligopoly ...................................................................................................... 4

Malaysian Vehicles Sales January to June 2010 .......................................................................... 6

Car Sales Drop in 2009 ............................................................................................................... 8

Best selling model in the world ................................................................................................... 8Malaysia car sales to recover in 2010 .......................................................................................... 9

MAA Vehicle Sales, Market Share, and Ranking Summary for Passenger cars & Commercial

Vehicles in Malaysia for Jan to June 2008 ................................... Error! Bookmark not defined.

PRODUCTION & SALES FOR FEBRUARY 2011 ................... Error! Bookmark not defined.

1. PRODUCTION ...................................................................Error! Bookmark not defined.

2. SALES ................................................................................Error! Bookmark not defined.

3. Market Performance in February 2011 ............................................................................... 11

The objectives of the NAP ........................................................................................................ 12

NEW POLICIES AND MEASURES IN THE NAP REVIEW .................................................. 15

A. MANUFACTURING LICENCE: PROMOTING HIGH IMPACT SEGMENTS .......Error!

Bookmark not defined.

B. TAX/DUTY: PROMOTION OF EXPORTS OF VALUE ADDED PRODUCTS ............. 16

C. TECHNOLOGY: PROMOTING HIGH VALUE AND GREEN TECHNOLOGY ........... 17

D. SOFT LOANS/GRANTS: MEASURES TO ENHANCE COMPETITIVENESS OF

PARTS/COMPONENTS MANUFACTURERS .................................................................... 18

E. STANDARDS: EFFORTS FOR INCREASED SAFETY ................................................. 19

F. THE APPROVED PERMIT SYSTEM ................................Error! Bookmark not defined.

G. THE NATIONAL DIMENSION: A STRATEGIC PARTNERSHIP FOR PROTON ........ 20

H. EFFECTIVE DATE ......................................................................................................... 20

Bibliography ...............................................................................Error! Bookmark not defined.


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Best Selling Car Brand in Malaysia

Compact car maker Perodua was the best-selling car brand in 2009, retaining its leadership for afourth straight year. Its market share rose to 31.1 percent from 30.5 percent in 2008.

National carmaker Proton gained ground with a 27.6 percent share, up from 25.9 percent in

2007. Japanese carmaker Toyota Motor Corp. secured 15.2 percent of the market, followed by

Honda Motor Co. with 7.2 percent and Nissan Motor Co., with 5.9 percent.

Malaysia maintained its status as the largest passenger car market in Southeast Asia with sales of

486,342 units, or nearly 91 percent of its total auto sales in 2009.

The Top 10 Best Car Brand in Malaysia in 2010

Perodua (Perusahaan Otomobil Kedua Sdn Bhd) is top car company in Malaysia.

This is the 5th time Perodua took the position consecutively with popular Myvi being the best

selling model in Malaysia. The Perodua Myvi has been on top.

Perodua holds a market share of 31.2% and with their all-time record sales of 188,600 units in

2010, this means it is the best selling car brand in the country.

The 13% increase in sales were mainly due to the strong demand from the customers for more

affordable cars in the compact car segment. Though Perodua sold 166,700 units in 2009 but that

was enough for it to be the top brand as well.

Perodua Alza is the best selling MPV (Multi-Purpose Vehicle) with 42,000 units.

Viva, the smallest compact car from Perodua chalked up 69,000 units in sales.


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CAR BRAND

TOTAL UNIT

SOLD IN2009

TOTAL

UNIT

SOLD IN

2010

Market share

%

1 PERODUA 166,736 188,641 31.2

2 PROTON 148,031 157,274 26.0

3 TOYOTA 81,784 91,559 15.1

4 HONDA 38,783 44,483 7.4

5 NISSAN 31493 34,701 5.7

6 MITSUBISHI 6,981 11,899 2.0

7 NAZA 11,119 9,362 1.5

8 SUZUKI 4,994 6,748 1.1

9 ISUZU 5,378 6,144 1.0

10 HYUNDAI-INOKOM 5392 5,573 0.9

Source : Malaysian Automotive Association (MAA)


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Market Structure Analysis

The market structure can be identified by considering the number and size distribution of firms

(market share in terms of subscribers and revenue); the extent to which products are

differentiated; how easy it is for other firms to enter the market; and the extent to which firms are

integrated or diversified (Ferguson,1994).

The typical measurements of market structure are 4-firm concentration ratio (CRn), Herfindahl-

Hirschman Index (HHI), etc. However, as there are only few firm in this market, individual

market shares are used to measure market power.

Market structure is Oligopoly

Base of the above information, it was deduced, the market structure is Oligopoly, in this market

few firm compete together. Main competitor are in the table was illustrated

Proton,Perodua,Toyota,Honda,Nissanthey compete together, in a Oligopoly in this situation

there is a entry barrier because of government intervention for supporting the local brand, it

means market structure is oligopoly with a duopolies power between proton and produa.

Oligopoly market base of four firm concentrations:

PERODUA 166,736 188,641 31.2

PROTON 148,031 157,274 26.0

TOYOTA 81,784 91,559 15.1

HONDA 38,783 44,483 7.4

If we add up their market share for top four company

Perodua : 31.2%

Proton : 26.0%


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Toyota : 15.1%

Honda : 7.4%

Total market share = 79.7%

It means in this approach when the total market share for the four major firm in the market is

more than %40,market share is Oligopoly, although Perodua and Proton with more than %55

have a duopoly power.

The market structure analysis summary is as follows:

Data Observations and/or Measurement Analysis / Comments

No. of firms Regulated oligopoly

Market share

Source:

Malaysian

Automotive

Association-

MAA

Subscriber

Perodua: 31.2%

Proton: 26%

Toyota: 15.2%

There is no single dominant firm. Howeve

Perodua is the leading firm in both revenue

subscriber market share, followed by Proton

Toyota.

Product

ifferentiation

Product differentiation based on type of car and model and

Minimal product differentiation as differen

model for different brand in terms of the pet

consumption and speed and other facility ar

bit different.

pricing structure to appeal to different customer

segments. Value-added services (different option.) are

quite homogenously provided by all manufacturers.

ntry barriers High entry barriers mainly due to governm

Regulations

Due to frequent technology changes,

Establish NAP and implement their decisio

Licensing and regulations

Heavy capital investments & minimum efficient of scale required

Tax on the importing and exemption for CKD import

Set a high level of standard for safety and environmently product.


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Exit barriers Uncompetitive situation compare to ASEAN producthuge capital investments are asset

specific to this industry

Besides, Malaysia recorded the highest half-year sale of 301,077 new vehicles in the period of

January to June 2010, a 19.8% increase from the same period of 2009.

Of the total units sold, 90.3% or 271,873 units were passenger vehicles, it means car from a

luxury product going to be a necessity product which has recorded the passenger car as the most

vehicles sold.

Malaysian Vehicles Sales January to June 2010Total Sold 301,077

Passenger vehicles 271,873 90.3%

Commercial vehicles 29,204 9.7%

Total Sold January to June 2010 301,077 100%

Malaysian Vehicles Sales January to June 2010

Passenger Vehicle Category

1 - Passenger cars 76%

2 - Multi-purpose vehicles (21 percent) 21%

3 - Sports utility vehicles (2 percent) 2%

Malaysian Vehicles Sales January to June 2010

Commercial vehicles category,


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1 - Pick-up trucks formed the largest chunk 65%

2 Truck 26%

3 - Panel van 6%

2009 TOP 10 POPULAR CAR MODELS IN MALAYSIA

VEHICLE SOLD IN 2009 IN MALAYSIA (Best selling car Malaysia 2009)

CAR MODEL

UNITS SOLD

IN DECEMBER

2009

TOTAL

UNITS SOLD

IN 2009

AWARDS

1PERODUA

MYVI 6,980 90,595

Best Model of

2007 Malaysia

2PROTON

SAGA6,039 71,688

Best Model of

2009 Malaysia

3PERODUA

VIVA

5,500 67,977Best Model of

2008 Malaysia

4PROTON

PERSONA3,652 42,984

5TOYOTA

VIOS2,878 29,387

6 HONDA CITY 1,474 19,722Best Model of

2009 Thailand

7PROTON

EXORA2,294 18,451

8TOYOTA

HILUX1,412 14,572


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9

NISSAN

GRAND

LIVINA

1,018 12,287Best Model of

2008 Indonesia

10 TOYOTA

AVANZA595 11,468 Best Model of

2007 Indonesia

For 2009, Best Model of the Year was Proton Saga and Best Value-for-Money Model of the

Year was Perodua Viva, though the best selling model was lead by Perodua Myvi from the year

of 2006.

In units sold in 2009, Proton Saga was in second place followed by Perodua Viva and Proton

Persona. Meanwhile, Toyota Vios in fifth place lead the list for imported cars followed by Honda

City, Toyota Hilux and Nissan Grand Livina. Honda City was best model of the year in

Thailand.

Car Sales Drop in 2009

Malaysia's 2 percent drop in auto sales in 2009 was small compared to a 28 percent decline in

Singapore, 20 percent in Indonesia and 16 percent in Brunei.

Thailand registered an 11 percent decline but remained the largest auto market in Southeast Asia

with total sales of 548,871 units, mostly commercial vehicles. Only Vietnam and Philippines

posted higher auto sales.

Best selling model in the world

The leading car brand in the world is BMW followed by Toyota, Honda, Mercedes and Porsche.

Toyota Corolla in the other hand is the best selling model in the world. This is followed by Ford

Focus, Ford Fiesta, Volkswagen Golf and Honda Civic.

Local cars are better for those who earn less than RM5k monthly, be it a Perodua or a Proton,

check your local car dealer for the best bargain. Some car dealers has better offers than the others

although the loan calculator is the same for new car. Car dealers sometimes offer discounts.


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Malaysia car sales to recover in 2010

Auto sales in Malaysia fell by a smaller-than-expected 2 percent in 2009 but will rebound and

could hit a record high in 2010 amid the global economic recovery.

Malaysia is Southeast Asia's largest passenger car market. The car sales fell to 536,905 vehicles

in 2009.

It exceeded the association's forecast of 500,000 vehicles as sales perked in the last quarter of the

year, buoyed by government stimulus measures which boosted consumer spending, improved

business confidence. There were also aggressive sales campaigns.

The stronger performance in the fourth quarter, underpinned by Malaysia's economic recovery, is

expected to extend into 2010, with auto sales seen rising 2.4 percent to 550,000 vehicles, beating

the record high of 552,614 units sold in 2005.

Malaysia's economy is forecast to rebound to grow 2 percent to 3 percent in 2010 after a slump

in 2009. However, the government has cut spending for 2010 to rein in a swollen budget deficit

and plans to revamp expensive fuel subsidies in the next few months.

Sales is expected to rise to 566,500 vehicles in 2011, and to surge to 618,000 by 2014. 2009 Top

most selling car in Malaysia is PERODUA MYVI


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THE TOP 10 FOREIGN CAR BRAND IN MALAYSIA IN 2009

CAR BRAND

TOTAL

UNIT

SOLD IN

2008

UNIT SOLD

DECEMBER

2009

TOTAL

UNIT

SOLD IN

2009

%

1 TOYOTA 99,995 7,643 81,784 15.8

2 HONDA 32,477 2,672 38,783 7.5

3 NISSAN 25,323 2,183 25,957 5.0

4 HYUNDAI-INOKOM 9,708 690 7,303 1.4

5 MITSUBISHI 7,318 829 6,981 1.3

6 ISUZU 5,026 563 5,048 1.0

7 SUZUKI 5,024 505 4,994 1.0

8 MERCEDES-BENZ 4,230 335 3,977 0.8

9 BMW 3,512 301 3,564 0.7

10 KIA 2,824 176 3,164 0.6

Data source: Malaysian Automotive Association (MAA)


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3. Market Performance in February 2011

Sales volume in February 2011 was 14,394 units or 26% lower than the previous month.

However, YTD February 2011 cumulative sales expanded by 3,892 units or 4.3% against the

same period in 2010.

Short working month in February 2011

Seasonal trend for the month of February

4. Outlook for March 2011

Sales would recover and volume expected to reach 2010 level.

Market conditions have returned to normal

Implementation of catch-up plans by car companies

Interest rates offers

Longer working month

MITI advances the Government of Malaysias agenda of liberalisation, paving the way for a

more competitive automotive industry for domestic, regional and global markets


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The National Automotive Policy (NAP) was introduced on 22 March 2006 to facilitate the

required transformation and optimal integration of the local automotive industry into regional

and global industry networks within the increasingly liberalised and competitive global

environment. The NAP is the main thrust for the formulation of the strategic directions of the

industry under the Third Industrial Master Plan (IMP3), 2006-2020.

Three and a half years after its introduction, the National Automotive Policy (NAP) has been

reviewed, resulting in new policies that will foster a more competitive market for local and

international companies. In line with the Government of Malaysias commitment to liberalisation

and the People First concept, the NAP Review provides further benefits for consumers in

terms of safety and environmental protection.

Types of Government Intervention

1. Inform: or persuade consumers/providers/suppliers to act in a certain way.

Publicize health risks (smoking)

2. Regulation: determines how a private activity may be undertaken.

At extreme govt can prohibit goods or activities.

Setting standards.

Regulate.

Includes mandates: obliges someone to do something, and (usually, though not

always) pay for it.

Regulation and mandates appeals to legislators

b/c(because) tackles problems without incurring government spending.

Affects spending of those that are regulated e.g. two day hospital days

after delivery.

3. Finance: health care with public funds.

Delivery can still be public.

4. Provide: or deliver goods/ services using publicly-owned facilities and civil service staff.


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Usually publicly financed and provided

More typical of developing countries

5. Taxes/subsides on goods e.g. cigarettes

Making Entry Barrier

1- Through establishing National Automotive policy as a road map for developing the

process of manufacturing, exporting and monitoring the national industry performance.

2- Taxes for importing the foreign car and automotive part (CKD)

3- Through using high technology and green technology.

4- Allocating Soft Loans/Grants for enhancing competitiveness of part / component

manufacturers.

5- Set a high level of standard for increasing safety and environmental friendly product

providing as a core competency.

6- Strategic Partnership for hiking their quality and competitive advantage and getting more

market share for avoiding the entry.

7- Providing some key resource in a cheaper price for national companies such as proton.

8- Exempting proton from import duties on CKD kits which lead to 20%-30% cheaper price

of their product

All of the above point will discussed in following of this project.

** Government Intervention: Regulation

The objectives of the NAP (National Automotive Policy)

review were to ensure orderly development as well as long term competitiveness and capabilityof the domestic automotive industry as a result of market liberalisation;


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create a conducive environment to attract new investment and expand existingopportunities;

enhance the competitiveness of the national car manufacturer through strategicpartnership;

foster the development of the latest, more sophisticated technology in the domesticautomotive industry;

develop high value-added manufacturing activities in niche areas;

enhance Bumiputera participation in the domestic automotive industry;

improve safety standards for consumers and promote environment-friendly opportunities;and

enhance the implementation of current NAPs policy instruments.

The new policies and measures under the NAP Review are expected to provide significant

contribution to the overall growth of the industry and the country. Emphasis will be given in

attracting investments in high value-added manufacturing activities using latest and high

technology. The opening up of Manufacturing License (ML) for manufacturing and assembling

activities in the selected segments particularly for luxury cars and hybrid/electric vehicles will

encourage new investments and expansion of existing investments in the country. Currently, the

hybrid/electric segment is still very new and has the potential to be promoted and developed in

this region. With the appropriate incentives offered by the Government, Malaysia would be able

to attract OEMs to move their operations into Malaysia. The emphasis on safety and

environment aspects under the NAP Review will ensure the continued development of the

domestic automotive industry. The phasing-out of imported used automotive products and

introduction of mandatory standards for parts and components and standards for fuel and quality

will spur the development of the automotive industry in the long run. As one of the measures to

enhance the competitiveness and ensuring long-term viability of the national car manufacturer.

a strategic partnership between PROTON and a global established OEM will be encouraged.

This partnership has to ensure:

increase in exports and make Malaysia as a production hub for the region;


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transfer of latest technology and implementation of R&D activities in Malaysia;

increase in local content and enhancement of development of Bumiputera vendorprogramme;

increase Bumiputera participation in dealership network; and

PROTON brand name and its domestic market share for specific segments are preserved.

Malaysia is committed in its obligation under ASEAN and WTO. Therefore, the NAP

Review has also taken into consideration Malaysias commitments under both ASEAN

and WTO. Malaysia will continue to implement its commitments under FTAs on the

removal and reduction of import duties for automotive products.

In line with Malaysias international commitments, the AP system will be terminated as

follows:

Open AP for used vehicles (commercial, passenger and motorcycles) to be terminated by

31 December 2015; and

Franchise AP to be terminated by 31 December 2020.

The termination of AP system by 2015 will provide a clear roadmap and as an interim period for

the AP holders to diversify and venture into other businesses. As announced in the Budget 2010,

each Open AP issued will be charged at RM10,000. A fund will be established from the income

collected and will be used to assist Bumiputera entrepreneurs in undertaking, among others, the

following areas/activities:EMBARGOED, 28 OCTOBER 2009.

Some of the Business Level Strategy:

securing distributorship/franchise rights and dealership of other makes of vehicles;

expansion programmes for authorized dealers;

venturing into other automotive sub-sector or other businesses;

upgrading show rooms and service centres; and


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participation in international seminars/motor shows/conferences/meetings or trade missions.

NEW POLICIES AND MEASURES IN THE NAP REVIEW

Several new policies and measures, covering licensing, duties, incentives, technology,

environment, safety, standards and regulations are being introduced under the NAP review, with

the aim of fostering a more competitive industry and freer market. The new policies include:

**Government Intervention: Taxes

B. TAX/DUTY: PROMOTION OF EXPORTS OF VALUE ADDED PRODUCTS

I. Tax Exemption on the Value of Increased Exports of Vehicles and Parts/Components

The NAP Review introduces substantially higher tax exemptions for exported goods with a

significant portion of value added in Malaysia. This reflects the countrys goal to expand the

amount and quality of exports. A tax exemption onstatutory income for all sectors is offered

based on the percentage increase in its value added.

New Measures2:

2. Current Measures Tax exemption on statutory income for all sectors is given based on

percentage increase in the value of exports provided the products attain the following value-

added criteria:

- 10 per cent of the value of increased exports is given to manufacturers provided the goods

attain at least 30 per cent value added; and

- 15 per cent of the value of increased exports is given to manufacturers provided the goods

attain at least 50 per cent value added.

The tax exemption on statutory income for manufacturers in the automotive industry is

enhanced:

- from 10 to 30 per cent of the value of increased exports, provided the goods attain at least 30

per cent value added; and


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- from 15 to 50 per cent of the value of increased exports provided that the goods attain at least

50 per cent value added.

II. Import Duty: removal/reduction in compliance with trade agreements

It is MITIs priority to promote free and prosperous international trade. Under the Free Trade

Agreements (FTAs), Malaysia is committed to gradually remove or reduce its import duty. The

automotive sector will meet the national commitment to the various FTAs. Details on duty

structures are available in the Agreements (please refer to MITI website: www.miti.gov.my).

III. Import and Excise Duty for Complete Built-Up (CBU) and Complete Knocked-Down

(CKD)

The rates of import duty (Most Favoured Nation-MFN) and excise duty for CBU and CKD

vehicles are maintained (Annex).

C. TECHNOLOGY: PROMOTING HIGH VALUE AND GREEN TECHNOLOGY

I. Better Incentives for Critical and High Value-added Parts and Components Production

Promoting the production of critical and high value-added parts and components is a crucial

scheme to increase the countrys human and technological capital and contribute to long-term

development goals. Companies manufacturing transmission systems, brake systems, airbag

systems and steering systems are eligible for better fiscal incentives i.e Pioneer Status (PS) of

100 per cent fiscal deduction for 10 years or Investment Tax Allowance (ITA) of 100 per cent

for five years.

II. Promote Hybrid and Electric Vehicles and Development of Related Infrastructure

Investing in the development of hybrid and electric vehicles bears the benefits of the acquisition

of new, high end. technology and the promotion of a more sustainable energy policy. A

comprehensive mix of fiscal incentives, duty exemptions and customised training and R&D

grants was included in the NAP Review to maximise returns on investment.


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3 Current measures Under the 2009 Budget, imports of CBU hybrid cars are:

exempted from import duty; and

granted 50 per cent excise duty exemption.

Both exemptions are given for a period of 2 years until 31 December 2010 to promote local

assembly.

Currently, the infrastructure for electric vehicles is not available in the country.

Investments in the assembly or manufacture of hybrid and electric vehicles will be

granted:

- 100 per cent ITA or PS for a period of 10 years;

- customised training and R&D grants in addition to the existing grants;

- 50 per cent exemption on excise duty for locally assembled/manufactured vehicles or provision

of grant under the Industrial Adjustment Fund (IAF);

- PS of 100 per cent for 10 years or ITA of 100 per cent for 5 years for manufacture of selected

critical components supporting hybrid and electric vehicles, such as:

o electric motors;

o electric batteries;

o Battery Management System;

o inverters;

o electric air conditioning;

o air compressors;

- additional attractive, customised incentives will be considered based on proposed activities.

The Ministry of Energy, Green Technology and Water will draw up a roadmap to develop the

infrastructure for electric vehicles.

D. SOFT LOANS/GRANTS: MEASURES TO ENHANCE COMPETITIVENESS OF

PARTS/COMPONENTS MANUFACTURERS


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To improve competitiveness of parts and component manufacturers and to enhance their

contribution to the automotive industry and economy, the Automotive Development Fund (ADF)

and Industrial Adjustment Fund (IAF) will be continued.

E. STANDARDS: EFFORTS FOR INCREASED SAFETY

I. Full Implementation of Vehicle Type Approval (VTA)

Under the current NAP, the Road Transport Department (RTD) was assigned to implement the

VTA project, which is yet to be established. Under the NAP Review, the Ministry of Transport

(MOT) will accord priority in the 10th Malaysia Plan for full establishment of the VTA

standards and testing facilities.

II. Gradual Introduction and Enforcement of Mandatory Standards for Parts and

Components

Due to the lack of a specific regulatory body responsible in enforcing standards, there is

insufficient coordination in the enforcement of mandatory requirements for parts and

components.

Under the NAP Review, the Ministry of Science, Technology and Innovation will coordinate and

formulate a roadmap for the introduction and enforcement of mandatory standards for

automotive products.

III. Gradual Phase-out of Imported Used Parts and Components

Safety and environmental concerns rose from the practice of importing used parts and

components without any restrictions or mandatory tests. The NAP Review is introducing a

mechanism to prohibit imports of used parts and components, effective from June 2011.

IV. Gradual Phase-out of Imported Used Commercial Vehicles

Currently, imports Vehicles

Currently, imports of used commercial vehicles are allowed. Under the new policy, imports of

used commercial vehicles will be prohibited, effective from 1 January 2016 in line with:

the gradual phase-out of imports of used parts/components; and

the termination of AP system for used vehicles.


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V. Clear Roadmap for the Implementation of Fuel Standards

Since September 2009, EURO 2M specification for petrol and diesel has been implemented. The

Government has now set a clear target of implementing EURO 4M specification for petrol and

diesel by 2011. The Ministry of Natural Resources and Environment will establish a roadmap for

fuel standards and quality..

VI. Gradual Introduction of Vehicle End of Life Policy

At present, there are 2.7 million passenger vehicles of 10 years or older on the road. Compared to

other countries, Malaysia presents a very low vehicle scrap rate and relatively high average

vehicle age. As a first step towards the implementation of a full Vehicle End of Life (ELV)

Policy, the NAP Review introduces mandatory annual inspections as a requirement for road tax

renewal for all vehicles aged 15 years or older. The Ministry of Transport will formulate a

roadmap to reach full implementation of the ELV policy.

F. THE NATIONAL DIMENSION: A STRATEGIC PARTNERSHIP FOR PROTON

A new strategic partnership between PROTON and a globally established Original Equipment

Manufacturer (OEM) will be established to enhance PROTONs competitiveness in a global

market and its long term viability.

G. EFFECTIVE DATE

The new policies and measures will be effective from 1 January 2010. MITI will coordinate

with the relevant ministries and government agencies on the follow-up actions for the

implementation of the NAP Review.


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Before discussion about pricing strategy in automotive industry in Malaysia it could be helpful if

we know a little more about their type:

Types of Pricing Strategies

An organisation can adopt a number of pricing strategies. The pricing strategies are based much

on what objectives the company has set itself to achieve.

Penetration pricing: Here the organisation sets a low price to increase sales and market share.

Once market share has been captured the firm may well then increase their price.

Skimming pricing: The organisation sets an initial high price and then slowly lowers the price

to make the product available to a wider market. The objective is to skim profits of the market

layer by layer.(price discrimination for minimizing the consumer surplus)

Competition pricing: Setting a price in comparison with competitors. Really a firm has three

options and these are to price lower, price the same or price higher.

Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a automobile manufacturer offering different car with

different features at different prices eg A Van and sedan model. The greater the features and the

benefit obtained the greater the consumer will pay. This form of price discrimination assists the

company in maximising turnover and profits.

Bundle Pricing: The organisation bundles a group of products at a reduced price. Common

methods are buy one and get one free promotions or BOGOF's as they are now known. Within

the UK some firms are now moving into the realms of buy one get two free can we call this

BOGTF i wonder?

Psychological pricing: The seller here will consider the psychology of price and the positioning

of price within the market place. The seller will therefore charge 99p instead 1 or $199 instead

of $200. The reason why this methods work, is because buyers will still say they purchased their


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product under 200 pounds or dollars, even thought it was a pound or dollar away. My favourite

pricing strategy.

Premium pricing: The price set is high to reflect the exclusiveness of the product. An example

of products using this strategy would be Harrods, first class airline services, Porsche etc.

Optional pricing: The organisation sells optional extras along with the product to maximise its

turnover. This strategy is used commonly within the car industry as it found out when purchasing

my car.

Cost Based Pricing: The firms takes into account the cost of production and distribution, they

then decide on a mark up which they would like for profit to come to their final pricing decision.

Cost Plus Pricing: Here the firm add a percentage to costs as profit margin to come to their final

pricing decisions. For example it may cost 100 to produce a widget and the firm add 20% as a

profit margin so the selling price would be 120.00


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Pricing Strategy in Automotive industry in Malaysia:

Like any other industry in automotive industry the pricing strategy is a combination of

Competition pricing: (base of the competitor price) and Product Line Pricing (base of the cos

of production) or most common strategy is Optional pricing in which manufacturer selling their

product base of the option of customers ,orCost Based Pricing,in which companies decided

about their proft and markup and selling price.

Some of the Announcement leads to changing the price:

In 20 November 2007, Proton announced that talks regarding any partnership with Volkswagen

Group had ended with immediate effect, citing improving sales over the year, a favorable export

outlook, and confidence in management turning around the company without external

collaboration. This unexpected announcement resulted in a 19% overnight drop in Proton's

share price to their lowest value in seven years, due to the market's perceived uncertainty about

the future financial viability of the company in an increasingly competitive local and world

market. Proton did however state that they may resume talks about collaborating with other

manufacturers at later unspecified dates.


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Appendix:

DUTIES & TAXES ON MOTOR VEHICLES

A) Motor Cars (Including Station Wagons, Sports Cars and Racing Cars)

IMPORT DUTYLOCALTAXES

CBU CKD MSP CBU & CKD

EngineCapacity(cc)

MFNASEANCEPT

MFNASEANCEPT

MFNASEANCEPT

ExciseDuties

SalesTax

< 1,800 30% 0% 10% 0% 10% n.a 75% 10%

1,800 -

1,999

30% 0% 10% 0% 10% n.a 80% 10%

2,000 -2,499

30% 0% 10% 0% 10% n.a 90% 10%

Above2,500

30% 0% 10% 0% 10% n.a 105% 10%

Summary of Sales & Production Data

SUMMARY OF NEW PASSENGER & COMMERCIAL VEHICLESPRODUCED AND REGISTERED IN MALAYSIA FOR THE YEAR1980 TO YTD DECEMBER 2010

YearPassenger

CarsCommercial

Vehicles4x4

VehiclesTotal Vehicles

1980 80,420 16,842 - 97,262

1985 63,857 26,742 4,400 94,999

1990 106,454 51,420 7,987 165,861

1995 224,991 47,235 13,566 285,792

2000 282,103 33,732 27,338 343,173

2005 416,692 97,820 37,804 552,316

2006 366,738 90,471 33,559 490,7682007 442,885 44,291 - 487,176

2008 497,459 50,656 - 548,115

2009 486,342 50,563 - 536,905

2010 543,594 61,562 - 605,156

Note:


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(i) Passenger Vehicle industry reclassified in January 2007 and includesall passenger carrying vehicles.i.e. Passenger Cars, 4WD/SUV, Window Van and MPV models.

(ii) Commercial Vehicles also reclassified on 1 January 2007 andincludes Trucks, Prime Movers, Pick-up, Panel Vans, Bus & Others.

SUMMARY OF PASSENGER & COMMERCIAL VEHICLESPRODUCED AND ASSEMBLED IN MALAYSIA FOR THE YEAR1980 TO YTD DECEMBER 2010

YearPassenger

CarsCommercial

Vehicles4x4

VehiclesTotal Vehicles

1980 80,422 23,805 - 104,227

1985 69,769 37,261 - 107,030

1990 116,526 63,181 11,873 191,580

1995 231,280 45,805 11,253 288,338

2000 295,318 36,642 27,235 359,195

2005 422,225 95,662 45,623 563,510

2006 377,952 96,545 28,551 503,048

2007 403,245 38,433 - 441,678

2008 484,512 46,298 - 530,810

2009 447,002 42,267 - 489,269

2010 522,568 45,147 - 567,715

Note:

(i) Passenger Vehicle industry reclassified in January 2007 and includesall passenger carrying vehiclesi.e. Passenger Cars, 4WD/SUV, Window Van and MPV models.

(ii) Commercial Vehicles also reclassified on 1 January 2007 andincludes Trucks, Prime Movers, Pick-up, Panel Vans, Bus & Others.


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References:

1- MAA, M. A. (2011, March 21). PRODUCTION & SALES FOR FEBRUARY 2011 (Press Release).

Retrieved 4 14, 2011, from maa.org.my:

http://www.maa.org.my/pdf/PressReleaseforfeb2011.pdf

2- Malaysian Automotive Association (MAA). (2011, March 21). PRODUCTION & SALES FOR

FEBRUARY 2011 (Press Release). Retrieved 4 14, 2011, from maa.org.my:

http://www.maa.org.my/pdf/PressReleaseforfeb2011.pdf

3- Malaysian Automotive Association. (2008). DUTIES & TAXES ON MOTOR VEHICLES. Retrieved 4

14, 2011, from maa.org.my: http://www.maa.org.my/info_duty.htm

4- Malaysian Automotive Association. (2008). Summary of Sales & Production Data. Retrieved 4 14,

2011, from maa.org.my: http://www.maa.org.my/info_duty.htm

5- Review of National Automotive Policy. (2009, October 28). Ministry Of International Trade and

Industry. Retrieved 4 14, 2011, from maa.org.my:

http://www.maa.org.my/pdf/MEDIA_RELEASE_NAP_Media_281009.pdf

Project

Type: Group Project (three in a group)

Topic: Consider any one of the industries in Malaysia and analysis the market structure, market

power, and its pricing strategies and critically examine entry barriers in the industry.

Module:DEC5013 Economics for Management

Lecturer:A. Prof. Dr. A.S. Santhapparaj

eco 6 recovered)

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