Used car dealers struggle to stay relevant, says FMCCAM

Despite the sales increase of new cars for the past 15 years, the used car market has remained unmoved

By RAHIMI YUNUS / Pic By MUHD AMIN NAHARUL

The second-hand car business may seem lucrative, but dealers of these used vehicles are staring at stagnated sales, aggressive promotions and price cuts for new cars, and challenges to secure financing.

With new vehicle sales surpassing 580,000 annually, Malaysia is one of the largest car markets in South-East Asia, despite the hefty tax slapped on vehicles and the high car price.

High new-car prices, however, have not helped the used car market have the lion’s share of the market despite the growing affluent of Malaysians. Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) president Datuk Tony Khor Chong Boon said despite the sales increase of new cars for the past 15 years, the used car market has remained unmoved.

He said the used car market has remained stagnant with about 400,000 units sold annually, whereas sales of new cars are reaching 600,000 units.

“Malaysia is the only country where used cars are not selling like hot cakes. In countries like the US, used car sales double the sales of new ones. In Europe, sales of these second-hand cars are twice the number of brand new cars, while Japan’s used car segment is 1.5 times more than new cars,” Khor told The Malaysian Reserve recently.

The International Trade and Industry Ministry recently said that the total industry volume (TIV) for the newly registered vehicle last year was expected to be around 575,000 to 580,000 units.

In 2016, the industry’s TIV was 580,124 units and 514,545 from the total are passenger cars.

The car industry hit a TIV of 666,677 vehicles in 2015, with passenger vehicles accounting for 591,275 in that year.

Vehicle sales in the country have been rising at a very rapid pace. Figures from the Malaysian Automotive Association showed in 1980 the sector’s TIV was only 97,262 units. In 2000, that number breached the 300,000 mark at 343,173 units.

Loans for passenger cars under hire purchase (HP) reached RM157.4 billion as of November 2017.

For 17 years, the new vehicle sales had risen more than 67% but sales of used car had not improved.

“There is clearly something wrong. We are currently studying the matter to address the issue,” he said, adding that the association which represents about 3,500 dealers from the 5,000 used car operators, has identified three main reasons behind the less favourable scenario.

He said low level of customer confidence towards used cars, value depreciation of these second-hand cars and strict HP financing.

“Customers’ concerns are manifold. They are afraid of buying used cars with wrong pricing and wrong car with bad quality. Others are afraid of buying cars with accident history, clones, write-off cars, vehicles involved in flood, half-cut and stolen vehicles.

“We need to change their perceptions about used cars,” he said, adding that unregulated practices among the used car dealers have made the situation worse.

“For instance, some cars are advertised with the wrong manufactured year. A car is advertised as four when it is actually five years old,” Khor said.

The association will be introducing an inspection system among its members, introducing new online marketplace and will look for used car financiers from Japan, China and Taiwan as part of the strategies to address these issues.

“What it means is that, whatever cars you promote, it must first go through the association’s screening to make sure all the information is genuine. Customers can also go to our appointed centres to get the cars inspected and obtain a detailed report,” Khor said.

The online marketplace is currently under construction and is expected to be rolled out this year. He said all these measures should help the used car industry by 2019 with the targeted volume to double to around 800,000 units in five years’ time.

Meanwhile, the sales performance among the dealers for 2017 had been mixed, with some experienced better or maintained sales, while others witnessed a 20% to 30% drop in sales. But Khor said, the used car market will remain flat this year.