Eventful 2021 for the auto sector

The annual TIV for 2021 is expected to shrink for the 2nd consecutive year due to the pandemic 

by FAYYADH JAAFAR  / Pic by TMR FILE PIX

THIS year witnessed a number of significant events in the automotive industry in Malaysia. Covid-19 has left the industry struggling with its aftermath with supply chain disruptions and lower total industry sales volumes. 

Proton Edar Bhd CEO Roslan Abdullah (picture) expects the annual TIV (total installed vehicle) for 2021 to shrink for the second consecutive year due to the Covid-19 pandemic. 

“As at the end of November 2021, TIV was just above 441,000 units compared to 529,434 units for the whole of 2020. The gap is too large to close with sales for December unaccounted for,” he stated, adding that the industry was hit by the lockdown this year. 

“This instantly wiped out 2.5 months of sales and production from total industry volumes and affected every sector within it, including vendors, dealers and workshops,” he added.

The shortage of parts is another problem for the industry as a car has over 20,000 parts with car companies dependent on a large network of parts manufacturers, sub-assemblers, transporters, importers and shipping agents just to get the bits needed to make a car. “This ecosystem was badly affected for many reasons in 2021, and the effects were felt on a global scale,” he explained.

He said the knock-off effect for car makers is that they had to defer new product launches. 

“2020 was really the year when Covid-19 changed all industries across the world. Nobody knew what to expect and everybody was making up their contingency plans as they went along. 

“This year, most companies already had plans and standard operating procedures drawn up, so we were ready,” he said. 

Roslan believes the biggest challenge for the industry in 2021 were delays in production due to shortages which meant supply in the automotive industry could not catch up to demand. 

He said there is a big overhang of units owed to buyers by all car brands in Malaysia and their priority must be to meet this demand as soon as possible. 

From a retail perspective, there is the issue of consumer demand once the Sales and Services Tax (SST) incentives expire on June 30, 2022. 

“We foresee demand to drop for a few months after the SST expires, but TIV may be boosted by new model launches and the sales for EVs (electric vehicles) that will benefit from tax-free pricing,” he said.

Roslan added that the cost of freight has risen tremendously in the past year and it now costs car makers more than double to ship a car or component to their export markets compared to the previous year, which is expected to affect component pricing as well as export volumes.

On the issue of technological innovation in the industry, Roslan said the industry was able to keep pace with the latest technology in a year that saw a lot of developments in autonomous driving, EVs and connected cars. 

“I think connectivity and electric powertrains will be the main agents of change in Malaysia’s car industry in the next few years. 

“Proton helped to give connectivity technology a major push in 2018 when we launched the Proton X70, and today, we are seeing more and more cars that can seamlessly connect with our phones to offer numerous new ways that we can interact with our cars. 

“From listening to our favourite songs, using our preferred apps, and even acting as a mobile hotspot, these software-driven developments will continue to change the way we interact with our cars over the next few years,” he said. 

He welcomed the government’s move to announce zero taxes for EVs over the next few years as it would lead to new model offerings and some much-needed investment in the charging infrastructure by private and public enterprises. 

“EV sales volumes are growing quickly in regions such as Europe, North America and China, so it is a question of when, not if, they will become more viable in a market like Malaysia,” he said. 

An EV has fewer parts than a combustion engine vehicle and is thus simpler to produce. 

“There are inherent barriers, of course, like the charging infrastructure, but once the industry hits the tipping point and the range of EV increases, this will no longer be a major concern,” Roslan explained. 

He said Proton will remain guided by the policies of the government regarding EVs in Malaysia and is also discussing all avenues with industry stakeholders, as well as shareholders and technology partners regarding alternative fuel and EV plans.