Car sales near pre-pandemic levels

Car sales cht

PETALING JAYA: Total vehicle sales could be back to near pre-pandemic levels in 2021, with the Malaysian Automotive Association (MAA) projecting total industry volume (TIV) to grow 8% to 570,000 units this year on the back of the renewed sales tax exemption and stronger economic recovery.

President Datuk Aishah Ahmad (pic below) said TIV may only surpass the 600,000 mark in 2022 as sales growth would be in tandem with economic performance, adding that any recovery would hinge on how quickly and effectively the Covid-19 vaccine could be rolled out.

“Many analysts are of the opinion that the economic recovery in Malaysia will be underpinned by an effective vaccine rollout, successful containment of the Covid-19 pandemic and also political stability.

“However, the vaccine will take time to be distributed nationwide. In view of this, we do expect 2021 to be a difficult and challenging year, ” she said during a virtual press conference.

Aishah added that lower hire-purchase interest rates would also assist in spurring automotive sales.

“Consumer spending is expected to be revived gradually and in tandem with the country’s economic recovery. Subsequent waves of Covid-19 infections, if any, could bring back stricter restriction measures.”

She added that a prolonged movement control order (MCO) would also impact vehicle sales in Malaysia.

“The persistent weak ringgit against the euro and British pound will continue to affect consumer and investor sentiment, as well as impact car prices. However, we believe that the introduction of new models with the latest specifications, design styles and at very competitive prices, can assist at sustaining buying interest.

“Aggressive promotional campaigns by car companies will also push sales and help maintain market share.”

An analyst said the vehicle sales tax exemption, which expires on June 30, would play a huge role in spurring TIV this year.

“Note that in April last year, the MAA had revised downwards its 2020 TIV forecast to 400,000 units from the 607,000 units it had projected in January.

“However, after the vehicle sales tax exemption was announced in June last year under the Short-Term Economic Recovery Plan (Penjana), the MAA revised upwards its vehicle sales target for the year by 17.5% to 470,000 units. Still, TIV for 2020 exceeded expectations, ” he told StarBiz.

The MAA announced yesterday that TIV had hit 529,434 units in 2020. This was, however, 12% lower than the 604,281 units achieved in 2019.

The drop in TIV can be attributed to the disruptions to businesses as a result of the MCO that was implemented in March to curb the spike in Covid-19 infections.

Most car companies were forced to shut down their operations and were only allowed to resume operations almost two months later in May, under strict standard operating procedures.

However, TIV for every single month of 2020 since June had been consistently higher than 2019.

December 2020 also saw TIV hit 68,836 units, the first time that monthly sales had surpassed the 60,000-mark last year.

Aishah attributed the sales jump in December to the sales tax exemption, which was initially supposed to end on Dec 31.

“A lot of people were buying forward to capitalise on the sales tax holiday, ” she said.

Under the vehicle sales tax exemption, locally-assembled cars are exempted from sales tax while for imported cars, the sales tax will be cut from 10% to 5%, until Dec 31,2020.

Earlier this month, the government announced that the tax exemption would be extended until June 30,2021. Under the extension, the sales tax exemption percentage remains unchanged.

In light of the sales tax holiday being extended until June, Aishah said vehicle sales should remain steady during the first half of this year.

“Should the tax exemption not get extended, we do expect a lot of people buying ahead to make the best of the tax holiday. However, even if there is no extension, we expect car companies to continue trying to boost their sales via rebates and various promotions.”

As for projected sales for this month, Aishah said performance is unlikely to be as strong as December.

“Sales volume in January 2021 is expected to be lower than December 2020, due to market uncertainty as a result of the re-implementation of the MCO, as well as the impact of floods in certain states in Peninsular Malaysia.”

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