KUALA LUMPUR: Used car sales are expected to resume their upward trajectory in 2023, as the cautious economic outlook will see more customers opting for cheaper or pre-owned vehicles.
Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) president Datuk Tony Khor said sentiment this year will be weighed by inflationary pressures, interest rate hikes and slower economic growth.
“When the market is up, the sales of new cars will also pick up. At the same time, it will spur the used car segment,” he told StarBiz.
Khor added that when the market is down, there will still be a pick-up in used car sales.
“This is because people turn cautious and are more likely to downgrade to cheaper cars or pre-owned vehicles, which are more affordable than new ones.”
On a year-on-year basis, Khor said he expects used car sales to grow 10% in 2023.
“Since the pandemic, people have also generally been more comfortable driving their own cars rather than travelling via public transport due to health-related concerns about being in crowds.”
Khor added that transactions will also be buoyed by online platforms, which will expedite the buying-and-selling process for used cars.
According to Khor, 2022 was a stellar year for the used car industry, especially since the sales of new vehicles hit a record high of 720,658 units.
“As more people purchase new cars, the more they will need to trade in their old vehicles,” he said.
He added that around 65% of new car buyers will trade in their old cars.
So far this year, Khor said sales of used cars have been steady.
According to the latest Malaysian Automotive Association (MAA) statistics, sales of new vehicles rose 39% to 62,649 units last month, against 45,062 units in the previous corresponding period due to delivery of backlog orders.
Year-to-date February sales volume improved to 112,128 units against 86,595 units during the same period in 2022.
Sales of passenger vehicles rose to 55,555 units in February 2023, compared with 40,119 units in February 2022.
Meanwhile, sales of commercial vehicles increased to 7,094 units during the month under review from 4,943 units previously, according to MAA.
On the outlook for March 2023, MAA said sales volume is expected to be higher than February 2023, spurred by a delivery rush by companies with their financial year ending on March 31, 2023, Hari Raya festive season promotional campaigns and fulfillment of bookings made during the sales exemption period.
RHB Research, in a recent report, also said it expects the month-on-month sales of new vehicles to be stronger in March.
“Sales of vehicles in March will be especially high, given the month has historically been very strong.
“This is because it is the fiscal year-end for many Japanese principals such as Toyota, Honda, Mazda and Daihatsu.
“March will also be the final month for carmakers to deliver the sales and service tax (SST)-exempt orders.”
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 was reduced from 10% to 5%.
The tax holiday was supposed to end in December 2020 but was extended to June 30, 2021, and then again until the end of that year.
During the tabling of Budget 2022, the government announced that the SST 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.
However, buyers who had booked their vehicles during the tax holiday period have until March 31, 2023 to register their vehicles with the Road Transport Department.
While total industry volume in April will likely soften month-on-month against a high base, RHB Research believes that sales should nevertheless remain robust as carmakers continue to deliver on customers’ orders, which are still healthy even in the absence of the SST exemption.
“With strong orders on hand and with supply chain constraints largely resolved, we think that the auto companies have earnings visibility for 2023.
“As input costs will likely remain steady from the fourth quarter of 2022 levels and gradually decline (with falling raw material costs and easing supply tightness), the orders should translate to deliveries and into earnings,” said the research house.
