The sector saw an encouraging performance despite the discontinuation of SST, supply disruption and a challenging market 

by NURUL SUHAIDI / pic BLOOMBERG

THE 2023 outlook for the automotive sector and total industry volume (TIV) has been revised upward and likely to increase. 

This followed last year’s pent-up demand which had carmakers making a splash where most surpassed their full-year targets. 

The sector saw an encouraging performance despite the discontinuation of the Sales and Service Tax (SST), supply disruption and a challenging market. 

This year, more new car models are expected, especially from international brands and luxury car manufacturers. 

Kenanga Research anticipates the automotive sector’s TIV to increase by 2% or 690,000 units in 2023 from an estimated 680,000 units in 2022, driven by the continued delivery of order backlogs. 

In a note, the research house said its projection is more upbeat than the Malaysian Automotive Association’s (MAA) forecast of 636,000 units. 

“We believe the odds are in favour of MAA raising its number along the way. The vehicle sales in 2023 will be driven by the continued delivery of order backlogs to the tune of 350,000 units (as at end-October 2022),” it said. 

This number was unchanged compared to three months ago, which indicates that deliveries had been replenished with strong new bookings especially for attractive new models even in the absence of the SST exemption. 

Kenanga Research foresees vehicle sales remaining robust in 2023, supported by the reopening of the economy; financial assistance to the low-income group and subsidies on fuels, electricity and selected food items to keep the cost of living in check; a relatively stable job market; and healthy household balance sheets of the middle 40% income group. 

Despite the positive outlook, some economists remain cautious with 2023’s prediction and opined that vehicle sales might grow at a slower pace due to cautious spending, the impact of hiked interest rates and issue of supply chain and shortages of semiconductors, which eventually lead to higher car prices. 

Socio-Economic Research Centre ED Lee Heng Guie anticipated total vehicle sales to grow at a slower pace of 3.7% to 705,000 units from estimated 680,000 units in 2022. 

He expected the prices of new cars to increase amid the continued rollout of new models such as electric cars to woo new customers as well as the shortened delivery waiting periods. 

Sharing Lee’s sentiments, Universiti Kuala Lumpur Business School economic analyst Assoc Prof Dr Aimi Zulhazmi Abdul Rashid also believed that the automotive industry will have a challenging year ahead, especially in the first half (1H23) with the Overnight Policy Rate (OPR) which is expected to have two more hikes in early 2023. 

“As such, it will be better for potential buyers to hold on to their purchases with the hope of more stable rates or government fiscal intervention to stimulate the domestic economy. 

“Additionally, the gloomy forecast of the global economy in 2023 may also influence many from making decisions to upgrade to new rides as consumers are more cautious,” Aimi Zulhazmi told The Malaysian Reserve (TMR) recently. 

In addition, Malaysia Youth Council fellow Adli Amirullah also expected the same, in which the automotive industry will grow very slowly due to several reasons including higher OPR in 2023, lower consumption due to recession expectation by consumers and higher car price due to interruption in global supply chain. 

Adli explained that with higher OPR, the interest rate for hire purchase will become high, and so will the monthly instalment. 

“Secondly, when consumers are expecting recession in 2023, most of them will not spend and try to save more. This means no new car purchases at least for the next 12 months until they find the economic environment getting better,” he said. Despite that, globally, the auto chip shortage continues to abate. Domestically, most players are able to secure the semiconductors and components needed.

While the economists are weighing on the OPR effect on vehicle sales, research house Kenanga again disputed that hiking interest would have a significant effect on monthly instalments that will impact the sales demand. 

“Assuming that Bank Negara Malaysia raised the OPR by another 25 basis points (bps) to 3.00% in January 2023, taking the total OPR hike for 2022 and 2023 to a total of 125 bps (from 1.75% to 3.00%), this would only raise the monthly instalment for, say a Perodua Myvi AV priced at RM60,000 (90% financing margin, five-year tenure), by about 6% from RM978 to RM1,035,” it said. 

Kenanga Research backed it while noting the actual interest rates charged vary based on terms, financiers, car models, and the individual’s credit score, and newer popular models are most likely to be charged a lower effective interest rate range. 

Nonetheless, car manufacturers have made a series of announcements that new models will be added to the lineup this year. 

This is an encouraging sign and it is expected that new model launches and facelifts in 2023 to continue fuelling new orders. 

This is positive given the launches of new battery electric vehicles (EV) which will enjoy SST exemption and other EV facilities incentives until 2023 for completely built-up (CBU) and 2025 for completely knocked-down (CKD) models. 

New car models that are highly anticipated this year are from Proton, Toyota, Mazda, BMW, and Volvo, among others. 

For Proton, the seven-seater X90 will be ready for the Malaysian market this year to plug in their sports-utility vehicle (SUV) range. With more space, sleek and better connectivity, Proton X90 is expected to be a hit after X50 and X70’s successes. 

Toyota Innova Zenix is also another crossover seven-seater SUV with its large features, and is expected to be a competitor for Proton X90. 

Another car is the Mazda CX-60 Australia, a mild hybrid car which offers three power-trains, including two mild hybrids and a plug-in hybrid costing about RM179,000, is also expected to release sometime in June 2023. 

UMW Toyota Motor Sdn Bhd (UMWT) has also announced the Toyota bZ4X EV SUV, a fully electric SUV to debut in the Malaysian market this year offering an eco-friendly option for buyers. 

There is no final price yet for Malaysia but it is said Toyota bZ4X will account for the exemption of import and excise duty which is the exemption for CBU (fully imported) EVs. 

As for luxury brands, the first-ever BMW XM is ready to make its appearance in 2023 under the SUV category. Having the sportiest looks, this car is estimated to be priced at around RM1.4 million. 

Volvo EX90 is also another anticipated luxury car with a high advance of tech, versatile and stylish family car with modern proportions. 

It is equipped with cutting-edge technology in core computing, connectivity and electrification to optimise safety, efficiency and aesthetics. 

Based on the aforementioned cautious outlook, beyond the strong deliveries in the near term, concerns over a slower 2023 could continue to weigh on sector sentiment. 

Nonetheless, Kenanga Research on its sector-top picks, selected MBM Resources Bhd and Bermaz Auto Bhd. 

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• This article first appeared in The Malaysian Reserve weekly print edition