The Malaysian Reserve

Vehicle sales expected to decrease in adjustment to SST

Chia says the car market is expected to gradually naturalise in the next 3 to 6 months after the reintroduction of SST (Pic: TMRpic)

Year-end sales promotions this year are unlikely to be vibrant, according to analyst

By RAHIMI YUNUS / Pic By TMR

Sales of automotives are expected to decline towards year-end as the market naturalises with the reintroduction of the Sales and Services Tax (SST) on Sept 1.

RHB Research Institute Sdn Bhd head of Malaysia research Alexander Chia told The Malaysian Reserve (TMR) that the three-month tax holiday period prior to the implementation of SST saw passenger vehicle sales surge as customers took advantage of the cheaper prices and had made advanced buying.

“Auto sales would decline sharply after September. Those who have been eyeing to purchase cars this year would probably have done so between June and August,” he said.

The encouraging sales during the tax holiday period had also shed inventories for the remaining of the year.

Chia said year-end sales promotions this year are unlikely to be vibrant as the industry’s stock levels are already low.

He added that the car market is expected to gradually naturalise in the next three to six months after the reintroduction of SST.

Meanwhile, several industry players that TMR spoke to shared the same view and believe the competition would remain healthy during the adjustment period.

Mercedes-Benz Malaysia Sdn Bhd sales and marketing VP (passenger cars) Mark Raine said there would certainly be a slowdown in business. However, the company remains confident to hit another record sales in 2018 on the back of customer-centric products and services, as well as upcoming new launches such as the next generation C-Class and A-Class hatchback, he added.

In the meantime, Frost & Sullivan consulting director (Asia Pacific mobility practice) Animesh Kumar opined that original equipment manufacturers (OEMs) who are not benefitting from SST may come up with strategies to ensure potential buyers will not move to other makes.

“As a short-term measure, some may absorb SST, while others may come up with promotions in order to attract customers.

“As a long-term measure, OEMs will revisit their portfolios and strategies in order to identify ways to enjoy tax benefits and lower costs,” Animesh said in an emailed reply.

As it is, the Malaysian Automotive Association (MAA) has revised its annual total industry volume (TIV) forecast from 590,000 to 585,000 units.

MAA’s data revealed that the TIV jumped 28% year-on-year (YoY) in June — the first month with the zero- rated Goods and Services Tax — to 64,502 units, compared to 50,273 recorded in the same month a year ago.

In July, the volume rose again by 41% YoY to 68,465 units against 48,553 for the same month of the preceding year, creating history as the second- highest monthly TIV achieved in the local automotive industry next to the 69,371 record high achieved in December 2015.

For the first half of 2018, TIV rose 1.8% to 289,714 units, or 5,261 more than the corresponding period a year ago, supported by the tax leeway sentiment and Hari Raya promotions.

Some carmakers enjoyed growth of sales up to 50% with increased bookings and footfall in showrooms.

These companies surprised the market with lower car prices under SST, despite the automotive market is largely uncertain over the new prices of vehicles which have yet to be finalised.

Perusahaan Otomobil Kedua Sdn Bhd (Perodua) announced a price reduction of between 1% and 3%, citing almost all of its models would be cheaper under the new tax structure.

In a recently issued joint statement, the Perodua Dealers Association Malaysia and the Perodua Vendors’ Club said the new SST structure is better for the automotive ecosystem, which would lead to the lower cost of its vehicles.

Similarly, Honda cars — the second leading brand after Perodua — are now between RM2,268 and RM4,509 cheaper, except for its two completely knocked-down models Odyssey and Civic Type R.

Volkswagen Passenger Cars Malaysia Sdn Bhd has also revised its car prices downwards with the implementation of the new consumption tax except for its completely built-up models, from 1.5% (for the Tiguan Comfortline) to 2.6% (for the Vento Highline).

Meanwhile, Proton Holdings Bhd — the third OEM next to Honda in terms of market share — announced that it will absorb the SST charge for all car models in September 2018 to ensure buyers can still benefit from the tax-free prices of its cars.