Auto Parts Makers Concerned Over Electric Tariffs and Labour Costs Jump

Several local automotive components manufacturers are calling on the government to revise its decision to suddenly increase the electricity tariff surcharge that is scheduled to begin on Jan 1, 2023. This increase of more than 556% will see the current tariff rate of RM0.03 per kWh jump dramatically to between RM0.20 and RM0.27 per kWh.

This sudden increase of electricity tariffs is part of the government’s initiative to mitigate the impact of high coal costs on the energy sector by removing subsidies for medium and high voltage industrial users.

Image Credit: Perodua Suppliers Association - P2SA via Bernama

According to Bernama, Perodua Suppliers Association (P2SA) president Helmi Sheikh Mahmood said the increase “will have a profound impact on every industry, regardless of size as the net result will be shared by all.”

The P2SA president was speaking in a joint statement on behalf of other auto parts manufacturers, including Proton Vendors Association (PVA), Toyota Suppliers Club (TSC), Honda Malaysia Suppliers Club (HMSC), and the Malaysian Automotive Component Parts Manufacturers Association (MACPMA).

The group also commented on the government’s incentive mentioned above, citing that such implementation is wrongly timed, as the manufacturers also need to deal with the increasing labour costs due to the recently-revised national minimum wage level.

“That being said, the soon-to-be-implemented tariff, coupled with the recently revised Employment Act 1955 (Amended 2022), will be too heavy for us to bear,” Helmi said in the joint statement.

This amended act saw a 25% rise of the national minimum wage level, from RM1,200 to RM1,500, plus the reduction of weekly work hours from 48 hours to only 45 hours, as well as the change of the overtime working compensation. All in all, this amendment has resulted in a sudden increase to the manufacturers’ overhead costs.

“These two factors would be too heavy for us to absorb and as a result, the industry will have to pass these costs on to customers. This would have a devastating impact on the automotive industry as this would result in a massive increase of vehicle prices,” Helmi added.

In addition to this plea of delaying the implementation of energy tariff increase, the group also asked the government to work with them “to insure any changes, with regards to policies, laws, taxes, incentives, tariffs, or other initiatives would have the desired effect.”