There is now a ray of hope for the auto sector, especially with the more competitive hire purchase vehicle rates that have helped to spur demand.
However, several outstanding factors may still have a negative impact on sales and, by extension, a full recovery from the impact of the movement control order over the past two years.
Among the factors are an expected removal of the exemption of sale and service tax (SST), supply issues and more stringent requirements for vehicle loans.
Malaysian Automotive Association (MAA) president Aishah Ahmad said the industry is still waiting for the government’s decision on its proposal for another extension of the SST exemption.
“We are hoping that it will be extended until the end of the year. Otherwise, there will be a slowdown in sales,” she told FMT.
However, MAA is not particularly optimistic that their wish will be granted, given that three extensions have already been given since it was first put in place on June 15, 2020 under the National Economic Recovery Plan.
It was due to expire on Dec 31 that year, but the government agreed to extend it to June 20, last year. It was then extended again to Dec 31, before it was given its last extension to June 30, 2022.
Under the relief plan the RM897 million auto sector saw the sales tax removed for locally-assembled (CKD) models and a 50% reduction for fully-imported (CBU) models.
Historically, a 10% SST was imposed on both CKD and CBU vehicles. With the exemption, the SST for CKD and CBU vehicles have been reduced to zero and 5% respectively.
Another issue that has also eaten into sales is the long wait to take possession of newly purchased vehicles.
It could now take up to six months for some models to be delivered to the purchaser.
The problem has been attributed to the prevailing global shortage of electronic chips that are essential components in most new cars today.
“We have had many enquiries for our new C-segment sports utility vehicles but we don’t have any in stock,” a salesperson in Petaling Jaya told FMT. “There is a six-month waiting period,” he added.
“After the MCO was lifted, we were seeing more people at our showroom but we have not been able to capitalise on that because of the lack of units and diversity of choice,” another salesperson in Kuala Lumpur said.
National carmakers are not spared. It could take three to six months for them to deliver a selection of their models.
Worse than that are the more stringent requirements imposed by banks now for loan approval.
Many potential buyers have failed to get the loans they need, according to AmInvestment Bank analyst Muhammad Afif Zulkaplly.
“Only 50% to 55% of loans are approved, slightly lower than the rate in 2020 and 2021,” he told FMT.
Nonetheless, there has been an improvement in the past few months. Banks are already giving out more vehicle loans, thanks to improved consumer confidence and the resumption of activities in most economic sectors with the transition to the endemic phase of Covid-19 on April 1.
Afif said vehicles prices are set to rise by 8% to 20% with the removal of the SST exemption, but distributors and carmakers are likely to absorb the increase to spur sales.
To minimise the impact on margins, they are expected to reduce marketing and advertising expenditure.
Aishah said the MAA anticipated the total industry volume (TIV) to be around 600,000 registered vehicles this year, an 18% gain from last year. However, the MAA will revise its TIV upwards if the SST exemption is extended.
In 2019, before the outbreak of Covid-19, Malaysia registered a TIV of 604,287 registered vehicles but it dropped 12.4% to 529,514 units and another 4% to 508,911 in 2021.
The highest TIV recorded in Malaysia was in 2015 at 666,677 units.