Used car industry in for double-digit growth

Used car sales in 2022 is projected to grow to 480,000 units, compared with around 428,000 units sold last year.

KUALA LUMPUR: The used car industry is expected to register double-digit growth in sales this year, backed by higher online transactions, better buyer sentiment and improved economic conditions.

Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor said the pandemic had resulted in a rise in online transactions for used cars.

“We’re seeing more promotional campaigns done via social media. The transactions are transparent, with some sellers also providing guarantees and warranties for up to a year.

“Online platforms have also helped provide a better understanding of second-hand vehicles and this has bolstered customer confidence in used cars,” he told StarBiz.

For 2022, Khor said he is projecting used car sales to grow to 480,000 units, compared with around 428,000 units sold last year.

“We are expecting double-digit growth this year mainly due to online platforms that are now very active, especially since the start of the pandemic.

“Following the pandemic, people also feel that it is safer to buy and own a car, rather than to rely on public transport.”

Khor said around 398,000 used cars were sold in 2020.

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Additionally, Khor said the implementation of a “Lemon Law” in Malaysia would help to spur sales of used cars.

“This way, the buyer will feel covered because buying a used car will be like owning a new vehicle.”

A Lemon Law allows customers to obtain a refund or replacement of a car that was purchased with a major mechanical defect.

Countries such as the United States, Singapore, South Korea, China and the Philippines have implemented the law.

In Singapore, it is incorporated into the Consumer Protection (Fair Trading) Act 2004.

Additionally, Khor said the sales tax exemption, which applies to new vehicles, has also had a direct effect on the sales of used cars.

“As more people buy new cars, the more they will need to trade in their old vehicles.

“We are hopeful that the government will extend the exemption until the end of this year.

“We still have to deal with the Omicron virus and have yet to fully recover from the pandemic,” he said.

The vehicle sales tax exemption was announced in June 2020 under the short-term economic recovery plan or Penjana.

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

The tax holiday was initially supposed to last until the end of 2020. However, it was extended to June 30, 2021; and then again until the end of the year.

During the tabling of Budget 2022 in October last year, the government announced that the sales tax exemption would be extended one more time until June 30, 2022.

The multiple extensions were mainly due to the repeated lockdowns over the past two years, which disrupted business operations and prevented car buyers from being able to fully enjoy the benefits of the tax holiday.

In terms of new vehicle sales, total industry volume (TIV) dropped 4% year-on-year to 508,911 units in 2021, as various movement restrictions caused by the Covid-19 pandemic last year hampered business operations for months.

The last time annual automotive sales were lower than last year’s numbers was in 2007 when the TIV hit 487,176 units.

In spite of the abysmal sales performance last year, the contraction was still lesser than the TIV contraction recorded in 2020, which was at 12.4%. A total of 529,514 vehicles were sold in 2020.

For 2022, the Malaysian Automotive Association is projecting vehicle sales to grow 18% year-on-year to 600,000 units.