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It’s not just about cars. It is also about people.

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During the KopiTalk #1 with Sr. Michael Geh (click here to view) for the just announced Economic Recovery Plan (ERP), I asked him this question. “With the sales exemption for car prices, do you think more Malaysians would be buying cars instead of property?” He laughed and responded that he hopes people could understand the differences between buying a car and a property.

Then on Facebook, we start to have debates about whether the sales exemption was a correct move since if people needs a car, they could just buy a secondhand one instead. Plus the fact that during this time when everyone is without a job, why the need for sales exemptions for the cars? Perhaps the news below can provide some clue as to why protecting all industries are important and many times what appears on the surface is just the tip of the ice-berg. Even luxury car makers could not run away from being affected

Article in nst.com.my Luxury car brand, Bentley has announced that it will be letting go around 1,000 people in the UK because of COVID-19 which has caused a downturn. Bentley is a Volkswagen division and it employs 4,200 workers in Britain. Bentley Motors chairman and chief executive Adrian Hallmark said, “Losing colleagues is not something we are treating lightly but this is a necessary step that we have to take to safeguard the jobs of the vast majority who will remain, and deliver a sustainable business model for the future.”

Car dealership group Lookers would be cutting about 1,500 jobs and shut 12 showrooms. James Bond’s favourite carmaker Aston Martin will be cutting around 500 jobs due to tumbling demand and ballooning losses even before COVID-19 started. Car sales in Britain has stopped after Britain’s lockdown which started on March 23. Please do read the article in full here. Article in nst.com.my

People should be objective enough whether they need a new car or a second hand car. People who wanted and could afford to buy a new car will definitely want some sweeteners to buy a car. Without the sweetener, they will choose not to buy. This will affect the sales people and in turn would reduce the number of orders to the manufacturing plant and if we look at the example from Britain for Bentley, this may mean a huge number of people becoming unemployed.

When people gets retrenched, they automatically loses the ability to buy goods and services. This will affect many other sectors which used to sell to them as well. This is why from Prihatin all the way to Penjana, all these measures seeks to protect the potential demand for goods and services. Once the market stabilises (or recover) and the demand for goods and services could continue moving by itself, then the government may no longer need to push too many fiscal injections.

So, that exemption for car sales tax is not just to make people buy more cars. It’s to prevent car companies including manufacturing, sales, servicing from having to let go people because of the lack of demand. Happy understanding.

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Next suggested article: Timing and the attractiveness of property investment always favourite questions

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