National Automotive Policy (NAP) - Overview, Highlights, and Analysis

National Automotive Policy (NAP)Given  the  significant  challenges  facing  the  automotive  industry,  in  particular  globalization, economic liberalization and increasing competition, the Malaysian government felt that there is a need to review the strategic direction and policy framework for the domestic automotive sector. This  change  towards  a  less  regulated  policy  is  crucial  to  maintain  the  competitiveness  of  the domestic automotive sector in the country and internationally and to make it thus viable in the long term.  Having  this  in  mind,  the  government  launched  the  National  Automotive  Policy  (NAP)  in March 2006, which primarily  aims at progressive market liberalization.  In September 2009, the NAP was revised to encourage new investments, ensure a long term sustainability of the domestic automotive  industry,  ensure  safety  and  quality  of  products  and  services  and  protection  of  the environment.Some highlights on the revised NAP:?Manufacturing  licence -Local  assembly  of  luxury  passenger cars  above  1,800  cc  or  priced above  RM150,000  is  fully  liberalized.  This  means  foreign  firms  are  allowed  to  obtain manufacturing licence and can hold 100% equity in the companies. However, current policy on  the  freeze  of  manufacturing  licence  for  reconditioning  and  reassembling  activities  is maintained.?Amendments to the AP System (Approval Permit) -The issuance of APs will be stopped by end 2015.?Incentives -Incentives such as Pioneer Status/Investment Tax Allowance for the manufacture of critical components for cars such as brake system and transmission.?Safety  standards -There  would  be  a  gradual  introduction  of  Vehicle  End  of  Life  Policy. Vehicles above 15 years will have to undergo mandatory inspection during road tax renewal.?Euro 4m specification -Implementing Euro 4m specification for petrol and diesel in 2011.?Tax/Duty -The  Import  Duty  structure  is  maintained  at  0%  for  CKD  and  5%  for  CBU  for AFTA. As for Excise Duty, there are no changes.?Imports -From June 2011, it would be prohibited to importused parts/components.?Establishment  of  a  strategic  partnership  for  Proton -The  quest  is  on  for  Proton  to  have  a strategic partnership with a globally established manufacturer.
Page 9of 9Required:(a)Identify the issues that require immediate attention by the Proton’s management. (b)Analyze the financial statements of Proton for the years2007 to 2011. What can you say about the company’s efficiency and profitability?  Use relevant ratiosto  support  your answer.(c)Develop a SWOTanalysis based on the case study above. Please include the ratios that you have identified in question (b).(d)Based on the SWOT analysis above, create a strategy that can mitigate the issues identified in (a)