Sime Darby: No indication of price hike in cars

But the details have not really come out yet, and whether it would affect our assembly operation, we don’t know, says Sime Darby CEO

By SHAHEERA AZNAM SHAH / Pic By RAZAK GHAZALI

THE new National Automotive Policy (NAP) will not impact Sime Darby Bhd’s locally assembled vehicles pricing structure for now, said its group CEO Datuk Jeffri Salim Davidson (picture).

The NAP, which was launched last week, has alarmed potential buyers after Honda Malaysia Sdn Bhd announced price increase of 5% to 9% for selected models effective immediately.

“The NAP is a very high-level and strategic document that covers quite a few areas. Among others, it supports the IR4.0 which has a lot to do with assembly operation.

“But the details have not really come out yet, and whether it would affect our assembly operation, we don’t know.

“At this stage, we don’t see any indication it would have an impact on the prices. For example, the European carmakers are trying to hold prices steady as much as they can due to fluctuations in currency exchange,” he told reporters at a media briefing in Subang yesterday.

The group’s automotive arm, Sime Darby Motors Sdn Bhd, is involved in the retail, distribution and assembly businesses of 30 auto brands ranging from luxury to mass market brands.

For its assembly operation, about 30% to 40% of vehicle parts are being sourced locally according to domestic and external requirements while the remaining portion is sourced from various countries.

“Generally, the parts for BMW and MINI come from Europe, but varies from model to model. A large portion of the parts for a vehicle goes to the engine and we have locally assembled the BMW models in Kulim, Kedah, where a big chunk of the parts are sourced locally,” he said.

For the first half of its financial year 2020 (1H20), Sime Darby Motors sold 43,264 units of vehicles with 53.9% of the sales made in China.

Due to China’s large contribution to its revenue, Jeffri said the Covid-19 virus outbreak is expected to affect the group’s automotive segment in the 2H20, while the extent of the effect has yet to be quantified.

“The virus is not getting any better and we can’t really quantify its impact as we don’t know how quickly it will be contained.

“Our business there has been impacted, but it could be due to the festive season. We are bracing for a challenging period in the 2H due to the virus outbreak, but remain hopeful there will be a catch-up after the outbreak is contained,” he said.

As of Dec 31, 2019, Sime Darby’s industrial division’s orderbook amounted to RM2.87 billion driven by resumption of infrastructure works in Malaysia and mining activities in Australia.

“The mining business in Australia is still very strong. There is a lot of demand for meteorological coal due to the low cost of production.

“On the local front, ongoing projects such as the Pan Borneo Highway, East Coast Rail Link and other infrastructure projects are expected to boost the construction sector and the purchase of heavy equipment,” he said.

For its second quarter ended Dec 31, 2019, Sime Darby’s net profit fell 11% year-on-year to RM282 million or 4.1 sen earnings per share due to the recognition of a deferred tax credit of RM129 million from the change in the real property gain tax rates in Malaysia last year.

Revenue for the quarter rose to RM10.21 billion from RM9.42 billion a year ago. The group declared a first interim dividend of two sen per share, to be paid on May 12, 2020. Sime Darby closed one sen lower at RM1.99 yesterday, valuing the company at RM13.53 billion.