PETALING JAYA: New volume-driven car launches in the fourth quarter of 2020 could help improve sales with backlog bookings flowing into 2021.
The fourth quarter of last year saw the launch of the Proton X50, Honda City and Nissan Almera.
Kenanga Research said vehicle sales would also be boosted by the extension of the vehicle sales tax exemption, seasonal promotions and new launches in the second half of this year.
“Our economics research team has the view that an expected global growth recovery and the impact of the large fiscal stimulus on the domestic economy would result in a projected growth rebound in gross domestic product (GDP) to 6.1% in 2021, compared with 2020’s GDP growth forecast at negative 5.1%.”The research house said it is maintaining its “overweight” call for the local automotive industry with a 2020 total industry volume (TIV) target of 500,000 units.
Kenanga Research added that the local automotive sector is expected to experience stronger recovery in 2021 and has set a TIV target of 585,000 units for this year.
“The Malaysian Institute of Economic Research’s consumer sentiments index score for the third quarter of 2020, at 91.5 points, showed consistent recovery under various government assists with a positive recovery in passenger vehicles loan approval rate at 67%, from the lowest of 31% in April 2020.”
Under the vehicle sales tax exemption, which was initially announced in June, locally-assembled cars will be exempted from sales tax while for imported cars, the sales tax will be cut from 10% to 5%, until Dec 31,2020.
The government has announced that the tax exemption would be extended until June 30. Under the extension, the sales tax exemption percentage remains unchanged.
TA Securities, in an earlier report, said the sales tax exemption would help to increase car sales in 2021.
“Note that during the sales tax exemption period, the TIV growth in July to November 2020 had increased by an average of 14.5% year-on-year. The weak first half 2020 car sales were due to the Covid-19 outbreak and the movement control order imposed by the government.”
TA Research added that it is revising its 2021 TIV higher by 5.9% to 627,000 units.
“Accordingly, we adjust earnings of companies under our coverage higher by 2.8% to 15.7% after factoring in higher car sales assumptions. This has raised 2021’s sector earnings by 5.8%.”
The Malaysian Automotive Association (MAA) revealed that total vehicle sales continued its year-on-year upward trajectory for the sixth consecutive month in November, rising 7.4% to 56,489 units from 52,584 units in the previous corresponding period.
The pick-up in sales was mainly due to the government’s tax exemptions while aggressive promotional campaigns by automotive companies continued to drive sales. Despite the year-on-year pick-up in sales, November TIV was 0.3% lower on a month-on-month basis compared with October.
Year-to-date November, the TIV is still far off compared with last year, with total sales standing at 454,708 units compared with 549,439 units in the previous corresponding period.
The MAA will have its first biannual meeting later this month to reveal the performance of the local automotive industry in 2020 and expectations for 2021.