Prime Minister Dr Mahathir Mohamad's recent statement that car prices will not decline when the Asean Free Trade Area (Afta) agreement comes into effect in 2005 did not come as a surprise to the local automotive industry.

"The prime minister and (International Trade and Industry Minister) Datuk Rafidah Aziz had always indicated that we should not expect lower prices," said Malaysian Automotive Association (MAA) president Aishah Ahmad when contacted yesterday.

MAA represents the interests of motor traders in the country and liaises with the government on important issues pertaining to the automotive industry.

On Thursday, Mahathir slammed the brakes on the hopes of many prospective car buyers who anticipated prices to decline following Afta.

Import duties on 'completely knocked down' (CKD) and 'completely built-up' (CBU) cars are expected to be capped at five percent by 2005.

No protection

The premier said while the Malaysian government could no longer impose high duties on imported cars in 2005, other taxes will be introduced for both locally produced cars and imported ones.

He also stressed that national car manufacturers, such as Proton and Perodua, would not be protected as all cars would be subjected to the same tax.

In May, Rafidah had hinted that the government may introduce measures such as new duties to protect local car makers when the sector is liberalised.

Meanwhile, Aishah said while the industry had hoped for some reduction in car prices, it is the consumers who will be more adversely affected by the policy.

She added that the industry is hoping to get more details on the proposed alternative tax measures as soon as possible.

Aishah said Malaysia would not violate any international trade regulations as long the government applied the tax ruling across the board as announced by the prime minister.

In a related development, Consumer rights group Era Consumer urged the government to be cautious in implementing the proposed domestic tax policy so that it is not discriminatory against imported cars.

When contacted, its secretary-general T Indrani warned that other Asean countries could take Malaysia to task if they find the proposed tax practices as discriminatory.