PETALING JAYA: Demand for new vehicles is expected to remain promising in the final quarter of this year despite the cessation of the six-month moratorium, as customers continue to seek affordable or even used cars in light of the current economic uncertainty.
Frost & Sullivan Asia-Pacific mobility consulting analyst Nur Afiqah Mohamad said the cessation of the six-month moratorium will result in replacement demand for more affordable vehicles and used cars, as financially challenged consumers will likely downgrade their existing vehicles to fit their post-moratorium budget.
“Generally, new vehicle sales in the final quarter of 2020 looks promising as consumers are expected to take advantage before the sales tax break and year-end promotions by original equipment manufacturers, ” she told StarBiz in an e-mail.
With the intention of reducing non-performing loans induced by job losses and salary reductions due to the pandemic, the government announced a blanket loan repayment moratorium for six months from April 1 under the Prihatin Rakyat Economic Stimulus Package.
According to the latest data by the Malaysian Automotive Association (MAA), total vehicle sales rose 13% year-on-year to 57,552 units last month, compared with 50,854 units in the previous corresponding period as the government’s tax exemptions and aggressive promotional campaigns by automotive companies continued to spur car sales.
Nur Afiqah said she expects that this momentum will be continued for the rest of the year. “However, the recovery rate will be gradual due to other factors such as high unemployment rate, lower average salary and slow economic growth affecting overall consumer spending. We are revising our forecast to 455,000 units.”
In January, Frost & Sullivan had projected total industry volume (TIV) to grow 1% to 608,790 units this year.
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.
Nur Afiqah said the tax exemption will certainly provide the necessary boost to new vehicle sales, similar to what was seen in 2018.
“However, the impact will be more moderate, especially in commercial vehicle segment where depressed investments have resulted in slowdown in major economic sectors such as manufacturing, construction and agriculture. In the passenger vehicle segment, financially distressed customers may be benefited but this time, the tax break is unlikely to generate euphoric demand that was created in 2018.
“Only the customers who need to change their cars will take advantage of this scheme but it is unlikely to induce new demand, ” she added. Year-to-date July, total vehicle sales stood at 232,245 units compared with 347,171 units in the corresponding period, due to businesses being forced to shut down for nearly two months during the movement control order (MCO).
TIV in the first half of 2020 plunged 41.1% to 174,675 units from 296,317 units in the previous corresponding period as a result of economic disruptions resulting from the country’s MCO to curb the spread of the Covid-19 pandemic.
Last month, 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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