Car sales to dip come September, says Perodua

By MARK RAO / Pic By ISMAIL CHE RUS

Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) good run in the first half of 2018 (1H18), when sales jumped 17.5% due to the tax holiday, is expected to dip when the Sales and Services Tax (SST) is re-introduced in September.

Perodua president and CEO Datuk Aminar Rashid Salleh (picture) said the momentum is unlikely to continue into the remainder of the year after the tax holiday period ends.

He said the company expects a period of adjustment for consumers when SST is re- introduced to replace the Goods and Services Tax (GST).

“While engagement with the government is ongoing, we are still unclear on the full mechanism of the impending SST.

“On the assumption that there will be an increase in vehicle prices from September onwards, we foresee that the public will go through a period of adjustment, hence, resulting in less demand for a certain duration,” he said during a briefing at Perodua’s headquarters in Petaling Jaya yesterday.

He said the impact could continue up to December this year where most automotive players will give good offers to buyers to reduce their carry-over stocks going into the new year.

Perodua sold 117,100 cars in 1H18, against the 99,700 sold in 1H17, capturing 40.4% of the total industry volume of 289,700 cars sold, while production rose 10% year-on-year (YoY) to 109,000 units.

This was largely contributed by the demand for the new Myvi model and sales spike, following the zero-rating of GST in June this year.

Despite the strong growths noted, the automotive company is maintaining its sales and production targets at 209,000 units (up 2% YoY) and 215,300 units (up 7.5% YoY) respectively for the year.

Finance Minister Lim Guan Eng announced that a 10% tax will be charged on the sales of goods and 6% for services under SST effective Sept 1.

Aminar Rashid said the government has yet to finalise the mechanism of the SST implementation and that industry players are unable to gauge the net-net cost to be borne from the new tax regime.

“From the conversations that we have had with the government, particularly the Royal Malaysian Customs Department, we understand that there will be mechanisms (used for the SST implementation),” he said.

“As a result of not finalising the mechanism yet, we do not know whether (we will incur) a net-net 10% charge or not.”

He added that any announcement on whether Perodua is going to absorb SST, will be made once this mechanism is finalised.

For 1H18, the 117,100 vehicle sales registered by Perodua comprised 46,860 Myvi, 33,870 Axia, 23,555 Bezza and 12,815 Alza car models, while sales peaked in May at almost 22,000 units.

The automaker also received over 185,000 orders over the period, with orders in June alone surpassing 40,000 following the 0% GST effective that same month.

Aminar Rashid said while it is working overtime to meet the demand, Perodua expects all orders made in June to only be delivered from Sept 1 onwards.

Meanwhile, the company spent RM123 million in capital expenditure (capex) in 1H18 — down 52.1% YoY — but this is expected to increase for the year to be on par with the RM450 million spent in 2017.

The remainder of the capex expected to be spent will be used to upgrade the efficiency of its Perodua Manufacturing

Sdn Bhd facility in Rawang, improve on its research and development capabilities and expand its after-sales service.

Perodua is Malaysia’s second national carmaker after Perusahaan Otomobil Nasional Sdn Bhd when it was established in 1993 as a joint venture between Malaysian and Japanese partners.

This includes its long-standing partner Daihatsu Motor Co Ltd who currently holds a 20% interest in the automaker.

The future ownership of Perodua remains contentious as shareholder UMW Hol- dings Bhd is intending to up its current 38% stake, with takeover bids for MBM Resources Bhd’s and PNB Equity Resource Corp Sdn Bhd’s respective shares in the company.

This was met with backlash from other shareholders and it is speculated that Daihatsu could pull out of the company if UMW Holdings’ proposed share acquisitions go through.

Perodua’s partnership with fellow automaker Daihatsu is pivotal in helping the company remain competitive in the increasingly liberalised automotive market in Malaysia, while improving on its export business.