US Unemployment, Autos, will a car rebate program work for Malaysia?

With the latest employment report from the US showing some positives, I'd just like to point out that the unemployment numbers have been showing job losses but the unemployment rate has decreased from 9.5% to 9.4%. This number can vary month to month but over a period of a few months, will straighten itself out. I don't think people should be jumping for joy just yet.

Some people have been criticizing auto sales in the cash for clunkers program to be just a subsidy for a short time. This is true for the specific industry, next year, the car sales will certainly fall without the cash for clunkers program. But people have been failing to realize how much economic windfall comes from a single car sale. Getting car sales up could be one of the most cost effective ways to help bring the global economy and American economy on track.

A single car involves thousands of parts from all over the globe. The heavier, more expensive parts will likely be made in the United States. I can think of no single purchase which has positive effect on so many industries than autos. Houses by comparison, involve mainly building materials and have a larger price tag, but the sheer number of components pales to a single car.

This brings me to my next point. It is likely a general rebate program such as the one the US uses in it's "cash for clunkers" program will not work in Malaysia. Why? Malaysia doesn't have a huge auto industry and mainly imports most of its auto component needs. The market is too small. Such a program won't do much to help the Malaysian economy. Also, large components can be made by nearby countries and shipped at a relatively low cost, thus increasing the economic leakage of such a program to other countries.

Of course, they could give an even bigger rebate to the Malaysian car manufacturers. That would work much better. It is important though, that the more expensive components are manufactured in Malaysia. Given the high tax rate of autos here, and that a lot of used cars are still worth quite a lot of money, much higher than RM5000 the government is refunding, it is just too small for people to seriously consider taking up the offer. They should probably up the rebate to 20% of the cost of a new car.