Brakes on car sales


Another analyst cautioned that the global chip shortage, if prolonged, could see local car companies delaying the production of some models.

PETALING JAYA: While expectations are that automotive companies will record bleak sales for June, observers say this may prolong into July as as non-essential businesses such as car showrooms and vehicle production facilities stay closed under an extended phase one of the National Recovery Plan (NRP).

The situation has been exacerbated by the worldwide chip shortage, which is affecting the production capacities of global car companies.

An analyst with a local bank-backed brokerage said many car companies could register no sales for June and July.

“With showrooms not being allowed to open and most government agencies either closed or working with minimal staff, sales for the month will be drastically affected.”

Nevertheless, pent-up demand as well as the ongoing sales tax holiday will boost vehicle sales once the movement restrictions are lifted.

“It will depend on our national immunisation programme and how quickly we can lower the number of daily Covid-19 infections.”

Kenanga Research, in a recent report, expected June to record no sales from the closure of all the showrooms and vehicle production under the NRP phase one period.“However, some units can be registered through the Road Transport Department’s e-registration system for vehicle purchases.

“These are units where loans have already been approved with an issued letter of undertaking and the completion of the registration was to ensure no lapse in the agreement.”

The research house is maintaining its total industry volume (TIV) target of 545, 000 units for this year.

“Our TIV growth will be driven by the extension of the vehicle sales tax exemption until end-2021, despite a hiccup in sales from the closure of showrooms and vehicle production halt which will be offset by the sufficient supply for newer models that garner better margins.

“We still believe the new volume-driven launches could help spur sales along with the overflowing back-logged bookings, further boosted by the sales tax exemption and seasonal promotions.”

A local news report said the local automotive industry could lose RM3.44bil in June alone.

Meanwhile, another analyst cautioned that the global chip shortage, if prolonged, could see local car companies delaying the production of some models.

“This could see the delivery of the car models being potentially delayed.

“Once the restrictions are lifted, we expect pent-up demand that will surely drive sales, especially with the sales tax exemption in place. Car companies are going to have a tough time keeping up with demand, ” he said.

Last week, Malaysian Automotive Association president Datuk Aishah Ahmad told StarBiz that the global chip shortage has impacted deliveries from overseas and local chip suppliers, leading to a backlog on deliveries by three to four months.

“Depending on the percentage increase in rising material costs, if the local automotive original equipment manufacturers cannot absorb the costs, they may have to pass them to potential buyers, ” she said.

Meanwhile, Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor said the worsening global chip shortage situation could also have an eventual impact on the used car segment.

“Until you receive your brand new car, you won’t be able to trade in your used one, ” he said.

Nevertheless, Khor said the sales of used cars have been strong from January to May this year.

“For the first five months of this year, there have been 347, 000 transactions involving used cars, which is 20% higher compared with the same period last year.”

Khor said the movement control order (MCO) has had a severe impact on used car sales for June.

“For June, we are estimating a 70% drop, compared with May. However, for the first half of this year, we are still in positive territory because sales in the first five months have been strong, ” he said.

Khor is optimistic that the used car sales trend seen in the first five months of the year will continue once the MCO is lifted.

He added that the economic uncertainty created by the Covid-19 pandemic had also spurred used car sales.

“The pandemic has deterred people from using public transport. Instead, they feel safer to travel in their own cars.

“The uncertainty has also led people to buy used cars compared with new ones, because they are cheaper, ” Khor said, adding that banks have also been supportive when it came to approving loans.

Under the vehicle tax exemption, locally-assembled cars are exempted from sales tax while for imported cars, the sales tax has been reduced from 10% to 5%.

The Covid-19 pandemic saw a surge in demand for personal electronic items such as cell phones and laptops, which eventually led to a shortage of chips worldwide as production could not keep up with demand.

Some cars need more than 3, 000 chips per vehicle. Even if one of the chips is unavailable, the production of that vehicle cannot be completed.

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