Slashing car taxes may even help the country

Every time I was reading on affordability index on cars in US, their basic rule is not to buy a car which is more than 6 months a person's income. If that man's income per month is USD4,000, he can afford a Camry based on what that index is saying.

If I want to calculate based on Malaysian income per capita which we are at the current number of RM28,000, we're way off the chart - of course we are comparing against US here. A new MyVI (please, don't mention foreign brands to me) already costs something like RM50 - RM55k - Two years average income per capita, that is.

Now the idea of slashing car taxes is going to be a very popular idea for sure, but can we do it as it may affect government's revenue, some may say. I do not think we can model this until the actual implementation is taking place, but Think along these lines:

1. There's a higher turnover for new cars, hence the absolute amount of earned taxes may not reduce by that far. Government do not earn (much) from the second hand market. If cars are affordable to more people, perhaps (I am sure) there are a smaller market for second hand cars and definitely a larger market for new car sales. Car scrapping industry may just be kick-started;
2. Disposable income will definitely improve - imagine the wonders that can happen from here - nothing beats giving money to the people on the streets in terms of recycling the cash;
3. More cars sold means more income to the sales people, distributors - again more money to people on the streets;
4. Less breakdown on the roads, and perhaps even lesser jams. Some may say more cars means more jams - think again;
5. More cars means more pollution, yes - but I did not recommend reduction of tolls. In fact, more new cars may mean less pollution per car;
6. I have to really promote reduction of subsidies for petrol though as this is not right;
7. Other means of taxes on cars: road tax, automotive components maybe hence government may not lose much here;
8. Lesser APs means lesser illicit monies transferred out of the country??? Hello! APs are never right ok, so is illicit money transfer;
9. A more dynamic automotive industry in Malaysia - imagine what can really happen here.

If slashing taxes for cars really happen, I will re-rate (positively) all automotive assemblers in Malaysia except for perhaps DRB-Hicom or maybe DRB may even get re-rated as they do assemblies and sales for Honda and other marques? That has to be really studied in-depth though as one brand may just be scrapped (almost, as I heard the news VW is interested again?).

But we know for sure that for more than 25 years we have really suffered under the protect "local cars" scheme. I am just giving up as you know who is being protected - yet again!

Proton: Is Syed Mokhtar for the land or for the business?

Syed Mokhtar is a very shrewd businessman. Proton is a business which needs rescuing - by a foreign party however - as for 25 years not any local businessman here have proven the ability to make the business of automotive production successful. Moving forward, the business of producing cars will get even more competitive as there are companies such as Volkswagen, Toyota, Honda, GM, Ford, Hyundai and several other smaller brands fighting it out in a very competitive environment. Those who are successful however will benefit as it is a very lucrative business.

This type of competition however is not for Syed Mokhtar. He is already having his hands full with other businesses. Today, the news appeared that Syed Mokhtar is pulling Proton private. Why? Just look at its land...

Major portion of land held Proton - does not include others in UK, US and other states in Malaysia

A quick calculation - 7,142,890 sq ft in Petaling and Glenmarie alone. How much does freehold land in Glenmarie fetch? RM200 per sq ft easily. It will be worth more if the single piece is very large - err say 163 acres where you can use for multi development? What do you think it is worth then? RM1.4 to RM1.6 billion.

What about the 55 million sq ft land in Tanjung Malim? RM10 per sq ft for a industrial freehold land is reasonable for that place. That would come to RM550 million.

Hence, we now know that the total value for Proton's land in Selangor and Tanjung Malim alone could be worth up to RM2 billion. This does not include the others in other states in Malaysia (for Sales and Service), UK (Norwich, Bristol) and US.

What is the value of land in the books? RM215 million - just. Hence it is way under-declared.

Shows land value in the books at RM215 million

By going private, Syed Mokhtar is putting up RM3 billion to buy back all the shares at RM5.50 per piece. The total net asset value in the books alone is RM5.4 billion and we know that the asset especially land is underdeclared.

So what do you think? Syed Mokhtar is for the land or business? - or both? As he probably has more things up his sleeves. What about his relationship with Volkswagen via DRB-Hicom and we know that VW was interested in Proton's manufacturing plant before.

Note: In most cases, where there is an acquisition exercise, usually fixed assets will be revalued so that shareholders can have a view of what they are holding - in this case, those are bypassed.