Incentives needed to reboot car sales

Industry players ask the govt to relax hire-purchase financing rules, reduce taxation for at least 1 year, says MAA


CAR sales could be rebooted to the level last recorded during the 2018 tax holiday period once the Movement Control Order (MCO) ends, should the government provide tax deductions that have been suggested by automotive players.

Proton Edar Dealers Association Malaysia (PEDA) president Liew Vee Lee said dealers do have plans to offer value-added products and services to attract buyers post-MCO, but any price reduction would be guided by policies of the principal.

“Dealers cannot cut prices and we are bound by the Competition Act 2010. Car sales are more than just about price.

We are discussing with the principal to offer a value-added package to entice the customers,” Liew told The Malaysian Reserve (TMR).

Five car dealers associations — namely Perodua Dealers Association (PDA), PEDA, Honda Dealers Association Malaysia, Toyota

Dealer Council Malaysia and Federation of Motor and Credit Companies Associations of Malaysia (FMCCAM) — have submitted a joint memorandum to the Finance Ministry to recommend measures to help the industry.

The sector is asking for a grant allocation or subsidies to car producers, “handling fees” increment for hire-purchase loans’ commission from financial institutions and excise duty exemption until the end of the year.

According to the document sighted by TMR, the industry is also seeking a rate cut for employers’ Employees Provident Fund contribution and exemptions from contributing to the Social Security Organisation, the Employment Insurance System and the Human Resources Development Fund, among a few other measures.

The Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said automotive players are asking the government to relax hire-purchase financing rules and reduce taxation for at least one year.

Liew said dealers have sought the government’s help, including a recommendation to waive excise duty to boost sales post-MCO, adding that a similar effect could be seen as the three-month tax-free period in June-August 2018.

“We need the government’s help to be willing to cut excise duty or any duties. Look at the tax holiday and how everybody came out to buy cars,” Liew said.

The automotive sector sold 198,518 vehicles during the three-month tax holiday period, up 32% or almost 48,000 more units compared to June-August 2017, as consumers locked on the opportunities of not paying the 6% Goods and Services Tax.

Measures to mitigate the Covid-19 crisis are pushing thousands of car dealers, many of whom have invested millions in state-of-the-art service facilities and posh showrooms, to the brink of financial ruin.

The automotive retail segment is struggling with the rental of between RM50,000 and RM70,000 a month for a 3S (sales, service and spare parts) centre in Kuala Lumpur, according to a source. A monthly lease of a 4S (3S and body paint shop) premise is said to be about RM70,000 to RM120,000.

Many dealers are staring at losses up to RM300,000 when outlets are forced to close during the MCO, according to another source.

Liew said there could be a group of customers post-MCO who could adopt a wait-and-see attitude in buying cars.

PDA president Khairul Nizam Ayob said many outstanding bookings are made pre-MCO and unable to be delivered at the moment. He said 95% of the outstanding orders are still active.

“We do not hold many stocks before the MCO and cannot simply cut prices because there are policies set by the principal.

“Meanwhile, the marketing and collecting bookings are continued and to be fulfilled after the MCO,” Khairul Nizam told TMR.

He said dealers would need to find ways to increase customers’ trust to purchase cars in the next few months for sales recovery.

FMCCAM president Datuk Tony Khor Chong Boon said car dealers are considering a “buy-now-pay-later” mechanism as part of the solutions to increase sales after the MCO.

Khor said the method is better than offering a great discount because the latter would lead to the new car profit margin to be further compressed while the new car dealer commission is already thin. Besides, he said new car price reduction is expected to cause used car prices to drop.