Carmakers brace for soft market after bumper tax-free period

OEMs are expected to see a drop in sales post zero-GST due to advance purchases  and exhausted stocks


Carmakers are bracing for a soft automotive market in the final months of the year as the dust settles after the three-month tax holiday ended.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said original equipment manufacturers (OEMs) are also expected to see a drop in sales post the zero rated-Goods and Services Tax (GST) as a result of advance purchases and exhausted stocks.

“The market will be soft for the next three months. The sales for completely-knocked down vehicles will not increase much for the next few months,” Aishah told The Malaysian Reserve (TMR).

An industry source concurred and told TMR some carmakers will only be able to deliver cars to their dealers in the first and second week of September, which would be a hindrance for new purchases to be registered.

Aishah said September was a lacklustre month and MAA is expected to announce the latest figures next week.

Honda Malaysia Sdn Bhd president and COO Roslan Abdullah told TMR the market is expected to decelerate by 20% in early October, while Mercedes-Benz Malaysia Sdn Bhd (MBM) is anticipating a decline in the near term.

Raine says sales of passenger cars could reach 550,000 units in 2018 (Pic by Muhd Amin Naharul/TMR)

MBM VP of sales and marketing for passenger cars Mark Raine, however, told TMR the effect on the premium segment might not be as strong as it would be in the mass market.

“I am quite certain the market is going to slow down in the fourth quarter (4Q) leading into the 1Q next year. For the premium market, I think it will be more or less stable,” he said.

In a previous report, RHB Research Institute Sdn Bhd head of Malaysia research Alexander Chia told TMR that year-end sales promotions this year are unlikely to be as vibrant judging from the low level of stocks.

He added that the car market is expected to gradually naturalise in the next three to six months after the reintroduction of the Sales and Services Tax (SST) on Sept 1.

On the production front, Aishah said the supply side will stabilise in the next one to two months, while the market is normalising after the implementation of SST.

An industry source said production capacity building will take time because the OEMs need to provide initial forecasts, while vendors require about three months to respond as some raw materials are imported from overseas.

The tax-free period from June to August saw customers’ excitement elevated with the lower car prices that led to a much higher sales volume.

Total industry volume (TIV) jumped by 31.9% to 198,518 vehicles during the three-month period, almost 48,000 more compared to June-August 2017.

For the full year, MAA has projected TIV to hit 585,000 in 2018, slightly higher than the 576,635 achieved last year.

Roslan remains optimistic the industry will meet the forecast TIV of 585,000 this year (Pic By Muhd Amin Naharul/TMR)

Roslan remains optimistic the industry will meet the forecast this year.

TA Securities Holdings Bhd analyst Abel Goon told TMR the automotive sector is expected to post a flat growth this year of around 1% to 2% with his figure at around 589,000 vehicles.

MBM’s Raine said sales of passenger cars could reach 550,000 units this year, well above MAA’s revised fore-
cast of 523,000 cars. However, he added that the number could decline by 3% to 4% next year.


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