Aggressive promotion to boost auto sales in H2

  • Auto
  • Tuesday, 28 Jul 2020

Better sales: Car buyers visiting a showroom in Petaling Jaya. The MAA has revised upwards its vehicle sales target for the year by 17.5% to 470,000 units.

PETALING JAYA: Vehicle sales in the second half of 2020 is expected to be spurred by aggressive promotional campaigns rather than tax exemptions, according to analysts, as consumer sentiment is expected to remain cautious amid the global economic uncertainty.

An analyst with a bank-backed brokerage said car companies would be aggressive in clearing their inventories in the second half of this year, after missing out in the first six months of 2020 due to business disruptions caused by the government’s movement control order (MCO).

“Each company will have their own internal targets to meet and will do as much as they can to achieve them within the remaining months of the year.

“Many will be trying to make up for lost sales during the MCO in March and April.”

He added that the tax exemption on vehicles would be a bonus, but cautioned that the reception may not be as good as when there was a tax holiday offered back in 2018.

“There is a lot of uncertainty in the economy today, compared with a couple of years back, ” he said.

When the former (Pakatan Harapan) government came to power in 2018, it announced a three-month tax holiday from June 1 to Aug 31, with the goods and services tax being zero-rated during the period.

The three-month tax break spurred car sales, with total industry volume (TIV) growing 3.8% to 598,714 units in 2018, exceeding the Malaysian Automotive Association’s (MAA) forecast of 1.5%.

Under the Short-Term Economic Recovery Plan (Penjana) announced by Prime Minister Tan Sri Muhyiddin Yassin last month, locally-assembled cars will be fully exempted from sales tax while for imported cars, the sales tax will be cut from 10% to 5%, until Dec 31.

TA Securities in a report yesterday said it did not expect the proliferation of car sales during the tax holiday period in 2018 to repeat this time due to absence of pent-up demand, which was seen in the last tax-holiday period.

“In addition, the weakening consumer sentiment and stringent hire-purchase loan requirements may dampen TIV growth.

“As such, we keep our TIV forecasts for 2020 unchanged at 431,000 units, or a 29% decline year-on-year due to the challenging market condition.”

The research house is maintaining an “underweight” call on the local automotive sector.

“We expect the weak sentiment would result in bumpy earnings recovery in the second half of 2020.”

Last week, the MAA announced that it was revising upwards its vehicle sales target for the year by 17.5% to 470,000 units, as the grim economic outlook is likely to be buffered by the various incentives recently announced by the government.

Nevertheless, the projection would not only mean that sales this year would be a 22% contraction from 2019’s 604,287 units sold. It would also be the first time in 13 years since TIV failed to surpass the 500,000-unit mark.

In April, the MAA revised downwards its 2020 TIV forecast to 400,000 units from the 607,000 units it had projected in January.

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Auto , TA Securities , sales , aggressive promotion , MCO , cars ,


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