Malaysia is the World’s second biggest importer of reconditioned Japanese cars as reported by Japan’s Ministry of Finance in 2015, where Malaysia imported nearly 55 billion Yen (about RM1.93 billion) worth of reconditioned cars from Japan.
Reconditioned cars are refurbished used cars imported from overseas (typically from other right hand drive markets like UK, Japan, and South Africa), and sold via parallel importers. In Malaysia, regulations limit them to a maximum age of five years old.
In terms of value, higher-end luxury models tend to get shipped to South East Asia, where many high-end Toyota models like the Alphard, Vellfire, Estima, Harrier, FJ Cruiser, and Land Cruiser are in strong demand. A large number of reconditioned European makes like Bentley, Rolls-Royce, Range Rover, Audi, BMW, MINI, Mercedes-Benz and Porsche models sold in this region are also shipped in from Japan, apart from the UK.
The automotive market is very volatile. While the top end buyers, of which there are relatively few, are quite consistent, the mid-range and the lower end of the market is quite sensitive.
Finance institutions also play a large part, affordability in the Malaysian context (at least for the majority), is about how much is the monthly instalment the buyer has to pay, in relation to his disposable income.
We Malaysians also appear to be quite immune to price hikes, as long as we can afford the monthly payments, it doesn’t matter how long we have to pay.
The super wealthy are relatively well insulated against price hikes of up to 10 per cent for luxury vehicles, there will still be buyers, but margins across the board will be affected by the weak ringgit means that only the resilient business owners will still be buying.
The premium cars will likely see a shift down to smaller and lower priced models, business people still will want the prestige of ownership, but may opt for premium reconditioned cars. Due to the uncertainties related to the exchange rates, business owners will tend to be more prudent in car purchases.
Hence, KAPB focused its investment on the trading of imported used luxury and premium cars where most of the buyers are genuine, which resulted in fast and high returns on investment.