Weak ringgit and costlier parts keep car prices high

by ANIS HAZIM / pic courtesy of Proton

CARS are expected to become more expensive this year due to the double effect of higher raw material costs and weaker ringgit, RAM Rating Services Bhd (RAM Ratings) said.

RAM Ratings specialist Ben Inn said the higher prices will affect demand on top of high inflation, and sees potentially tighter financing. 

The cost of car ownership will also increase from higher interest rates and expected rollback on fuel subsidies.

He said even though there will be continued demand for cars, parts suppliers will continue to face difficulties from labour and part shortages.

“As such, many OEM (original equipment manufacturer) players are trying to secure alternative sources where possible and also stocking up the critical parts. Combine with the strong demand, many bookings will not be fulfilled by end of this month,” Inn said at the RAM Insight Series webinar today.

He said Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and Proton Holdings Bhd’s market share have fluctuated significantly since 2021 due to supply issues.

“Especially this year, there is a severe global shortage of semiconductor chips and delays in raw materials and parts due to lockdowns in China. In fact, the supply problems have also delayed launches of certain models,” he said.

Despite the headwinds, he expects that there will be new models launched, such as the SUVs by Perodua, Proton and Toyota, once there is a sufficient supply given the strong demand.

The analyst also foresees that Malaysia’s total industry volume (TIV) could possibly reach 600,000 units this year.

“However, this figure is dependent on the availability of critical parts,” he noted.

He said the TIV is estimated to further rise above 600,000 units if the exemption SST is extended or at reduced rates, such as 50%, 25% and 0%.

“In the third quarter (2022), we do expect a significant fall in sales, but more of a knee-jerk effect and shortage of inventory.

“Sales are still expected to be supported by bookings made in the first half of 2022 with new orders picking up towards the year-end’s promotions,” he said.

Inn said the drop in demand will be more severe for car prices below RM100,000, while the premium cars segment is less affected. In addition, the latter segment enjoys tax-free options from electrical vehicles.