Expect fewer car launches in 2H20

Introducing new model is not a priority due to the high costs involved, says expert


CARMAKERS must put their new launches on the back burner amid uncertainties and hammered market sentiments as they recuperate from Covid-19 impacts.

Malaysian Automotive Association president Datuk Aishah Ahmad (picture) said introducing a new model in the second half of the year (2H20) is not a priority due to the high costs involved and weak market at present.

However, she said any models that are already assembled or brought into the country prior to the crisis would have no choice, but to debut despite the challenging conditions.

“It costs carmakers a lot of money to launch a new model, but those that had been scheduled earlier would still need to be launched.

“At the moment, the demand is hardly increasing and the timing is wrong,” Aishah told The Malaysian Reserve (TMR) recently.

Aishah said carmakers will require major planning to launch a new completely knocked-down (CKD) model, which includes sourcing local content, jigs and tooling while the programme is usually put in the pipeline as early as five years in advance by the principal.

She said launching a completely built-up (CBU) unit could be more flexible as it only involves importing cars.

Kenanga Research analyst Wan Mustaqim Wan Ab Aziz said in a recent report that planned new launches for 2H20 could be delayed given the weak consumer sentiment, but some reliefs could arise from incentive programmes under the National Automotive Policy 2020, positive impact from Bank Negara Malaysia’s Overnight Policy Rate cut and pre-emptive measures to assist those who are financially affected.

Kenanga maintained its ‘Underweight’ call for the sector with this year’s total industry volume target units of 420,000, down 31% year-on- year.

The research house believed that national marques would fare worse than non-national marques as target markets of the lower to mid-income range are the most financially distressed segment.

A new launch will typically bump up sales with added value and carmakers would usually launch at least one new model and one facelift in a year.

Auto companies are pinning their hopes on the announced sales tax exemption for new vehicles for six months until December to boost demand post-pandemic.

An analyst said many companies have indicated that they are focusing on clearing up inventories and firming up retail prices post-sales-tax waiver, instead of thinking about introducing new models.

“Launching is not their priority as they are mostly currently making losses,” the analyst, who declined to be named, told TMR.

On the contrary, one industry player argued that this could be the right opportunity for carmakers to launch a new model to the market to spur sales.

Also requesting anonymity, the industry source said the six-month sales tax exemption provides a wider timeframe for carmakers to boost demand and sales compared to the three-month zero-rated Goods and Services Tax implemented in 2018.

“Judging from the records, this six-month tax-free period is a wider window of opportunity to push sales. Carmakers have missed seasonal sales peaks during Hari Raya and they need to create a new peak, usually during year-end, with new launches,” the source told TMR.

With the sales tax waiver — 100% for CKD and 50% for CBU — automotive players have revised car prices downward in the range of 5%, expecting consumers to take advantage of the price cuts.

There is also the new norm of launching new cars virtually through online platforms which is less costly.

Concurring with Aishah, the source said CKD units will need huge preparation before launching in terms of local production.

The source added that original equipment manufacturers will have to follow the principals’ calendar when introducing a new model for the local market.