KUALA LUMPUR: The Malaysian Automotive Association (MAA) remains confident of car sales moving forward despite the recent overnight policy rate (OPR) hikes.
The association had revised its latest forecast total industry volume (TIV) up by 5% to 630,000 units for 2022 from a lower forecast made in January.
“When we check with our members, the the OPR increase is manageable.
“Banks are still depending on the quality of their customers – buyers can still get loans and they are not as stringent as believed,” MAA president Datuk Aishah Ahmad told a press conference.
The revised forecasts also did take into account the recent hikes in the OPR.
In January, it forecast forecast the TIV to grow to 600,000 this year from 508,911 in 2021.
Forecasts for passenger vehicle sales have also been revised upwards and they are now anticipated to grow by 25.3% to 567,000 from a the previous forecast of 540,000.
The commercial vehicles segment has seen its figures revised upwards to a growth of 12% to 63,000 from an earlier forecast of 60,000.
The revised forecasts also took into account the other issues that are affecting the automotive industry such as the ongoing continuation of components and chips shortages which could dampen the production of motor vehicles during the year.
The MAA also took into consideration that businesses may hold back investments in view of the ongoing uncertainties at the global level as well as the domestic political scene.
“Many analysts are expecting that the 15th General Election (GE15) will take place within the year,” she said.
Aishah said buying interest moving forward would be sustained by the continued growth in the gross domestic product (GDP) including the fulfillment of backlogged orders arising from the sales and services tax (SST) exemption flexibility that was recently announced.
“There will be continuation of efforts to fulfill backlogged orders and promotional campaigns by car companies to boost sales and maintain their market share,” she said.
“The introduction of new models such as those with latest designs and features as well as electric vehicles at affordable and competitive prices may assist to sustain buying interest moving forward,” Aishah added.
Commenting on the request by the MAA for the current Open Market Value (OMV) excise duty calculation method to be retained, Aishah said that this was still a work in progress.
“We have sent another letter to request for the government to reconsider and we have also had discussions with the Customs Department. The Customs Department have indicated that they would support an OMV calculation method that would not be revised,” she said.
“We are now waiting for the Ministry of Finance (MoF) to come out with the official approval letter. MoF is still working on it but it should be a positive (outcome),” she added.
The OMV is the final market value set for completely knocked down (CKD) vehicles fresh out of the factory, before the addition of excise duties.
It was reported earlier that the planned revision in how the OMV is calculated would cause CKD car prices to increase - but it is now put on hold with these latest developments.
In its note yesterday, UOB Kay Hian Research (UOBKH) said it made no change to its 2022 TIV forecast of 605,000 units which implies a 19% year-on-year growth.
“Automobile sales are expected to remain robust in the second half of the 2022 year due to the present substantial order backlogs, and the sector is also anticipated to benefit from an improvement in the global chip supply,” UOBKH said.
“Most of the car makers have been receiving positive bookings that will keep them occupied at least for the next five to six months or from now till the end of the year,” it added.
Having said that, the research house said it forecasts TIV in 2023 to register 550,000 units, down 9% from 2022 as it expects a significant slowdown in consumption due to the end of SST exemption.
There could also be a potential re-introduction of GST that could raise car prices further, it noted.
“Additionally, the rising inflation will corrode end consumers’ purchasing power,” UOBKH said.
It maintained its underweight rating on the automotive sector which now trades at 10.6 times 2023 forward price-to-earnings (PE) ratio, which is a slight discount to its historical five-year PE mean.
“We believe that the sector’s valuation could derate due to a cyclical car demand downturn from a high base. Additionally, the ongoing weakening of the ringgit against the US dollar and the prolonged chip shortage could pose downside risks to the sector’s earnings,” UOBKH said.
“Based on the companies under our coverage, we are forecasting a 6.8% and 4.6% fall in sector earnings and revenue in 2023, respectively,” the research house added.