Carmakers expect a challenging year ahead

The positive effect of the govt’s SST exemption on car sales will taper off due to MCO 2.0


CARMAKERS predict market conditions will be challenging as the rise in new Covid-19 cases will likely cause a slowdown in vehicle purchase as potential customers stay away from showrooms.

The reimposition of the Movement Control Order (MCO) this month will likely lessen the positive effect of the government’s Sales and Services Tax (SST) exemption on car sales, which complicates the total industry volume (TIV) forecast for 2021.

Honda Malaysia Sdn Bhd president and COO Sarly Adle Sarkum said even without the reimposition of the movement restrictions, the first month of 2021 was expected to see weaker demand.

“Some are recouping the high stocks sold in December 2020, while others are affected by forward buying frenzy last month and the extension of the SST.

“January 2021 will be slower as consumers grasp the realisation of MCO 2.0. Hopefully, February will be better,” he told The Malaysian Reserve.

Sarly said only an actual rollout of the Covid-19 vaccine will give some “jab” in the arm for market and consumer confidence.

“It will be a feel good confidence booster for all,” he added.

Perodua Dealers Association Malaysia president Khairul Nizam Ayob forecast a challenging year due to the coronavirus and MCO uncertainties.

“The zero sales tax until the end of June will help us create urgency to customers,” he said.

Khairul Nizam added that it was business as usual for Perodua dealers while maintaining strict standard operating procedures.

A study by automotive news site WapCar yesterday noted that the bulk of the forecast recovery hinges on the recently announced extension of SST exemption for completely knocked-down (CKD) and completely built-up (CBU) cars till June 30, 2021.

“The reimposition of MCO in many key market centres complicates matters. The situation is still too fluid to make a reasonably strong forecast,” it noted.

Previously, RHB Investment Bank Bhd forecast the nation’s TIV in 2021 at 580,000 units, which is still below the pre-pandemic level of 604,287 units recorded in 2019, but higher than 2020’s circa 500,000 units.

The final figures for 2020 are expected to be announced by the Malaysian Automotive Association (MAA) by the end of January.

Maybank Investment Bank Bhd estimated 2020’s TIV to reach between 512,000 and 515,000 units, following the sales tax exemption introduced in June 2020. MAA’s final estimation for TIV was 470,000 units.

This year, with the Covid-19 situation showing no signs of improvement, Malaysians are expected to remain cautious with their spending, WapCar said.

According to WapCar’s study, Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and Proton Holdings Bhd, which currently have 60% of market share, are expected to increase their hold in the market.

“The popularity of B-segment SUVs will continue to increase, mostly due to the affordability factor and introduction of new models like the Proton X50.

“However, the rise of B-segment SUVs comes at the expense of B-segment MPVs, a segment which has seen very little activity last year.

“The B-segment sedan will be affected slightly, but the Proton Persona, Toyota Vios and Honda City will continue to remain as core models for the respective makes,” the study said.

Overall, the market shares of Proton and Perodua are expected to increase further thanks to new model launches.

Proton is expected to introduce an updated Proton Iriz and Proton Persona, while Perodua will launch at least two more models, including a yet-to-be-named compact SUV, code-named D55L.

The research indicated that non-national brands, such as Honda, Toyota, Nissan and Mazda, will continue to maintain good sales momentum.

“New launches, such as the all-new Honda City, Nissan Almera, Mitsubishi Xpander and Toyota Vios, will sustain the non-national brands in 2021.”

The national auto sales anticipated encouraging sales last year. However, the MCO introduction in March 2020 stalled the market for two months.

The sales picked up again once the government announced the 100% sales tax exemption for the CKD models and 50% sales tax exemption for the CBU models.

For the nine-month period of 2020, the TIV stood at 454,708 units. However, this still falls short of the 549,439 units recorded for the same period in 2019.

“Many hope for 2021 to be a better year. The extension of sales tax exemption until June 30 will help boost the sector, but sales are expected to dip once more after that.

“There are also talks of a general election (GE) being held sometime in 2021.

“The past two GEs have caused disruptions to new car sales, so this will be yet another risk to the industry,” the study stated.