The current economic situation around the globe cannot be avoided and all businesses are going to be affected.

Only the most financially strong and well-established ones are able to weather this advancing economic storm.

The first casualties come from the tourism sector, with airlines and hotels getting hit hard. You are already seeing many retailers getting hit.

Next in line are the restaurant owners who cannot cope with high rentals and wages against slow online orders.

Stay at home chefs will improve their skills and see their savings increase. Average income earners will learn to shop less and buy only necessities.

This is why the next wave will be the automotive industry. Car sales will tumble hard.

Are cars a necessity or a luxury?

For some, cars are a necessity. For many others it is a luxury and this is the segment that will be hit the hardest in the coming months.

Car showrooms with their expensive rentals and operating overhead costs will not be able to survive the expected low sales volume.

New car dealers that emerged last year, especially new Proton dealers, will feel the pinch as there are too many showrooms in each city and town.

The used car market will also be hit hard as loan approvals will get stricter and buyers will think twice if they really need to change their current cars.

The Malaysian government, like many other global governments, has not set aside any incentives for both the new and used automotive segment.

Neither have the automotive-related government agencies come forward to lobby for incentives in the automotive segment.

Memorandum sent to the Malaysian finance ministry

This is the reason a Memorandum was sent to the Malaysian finance ministry on March 30, 2020, by five Malaysian associations that make up the bulk of the Malaysian automotive industry:

• Perodua Dealers Association Malaysia
• Proton Edar Dealers Association
• Honda Dealers Association Malaysia
• Toyota Dealers Council Malaysia
• Federation of motor and credit companies association of Malaysia

The main points being requested by the automotive industry

In a nutshell, the following seven points are their requests:

1. The Malaysian government provide a grant or subsidy to car distributors, workshops, after sales services and vendors to weather this crisis.
2. The current Bank Negara approved RM600 “handling fee” for car loans from financial institutions/banks/car loans to be raised to RM1, 000.
3. The removal of customs excise duty until the end of 2020.
4. The reduction of KWSP/EPF contribution from 13% to 5% until the end of 2020.
5. The removal of SOCSO, Service incentive payment (SIP) and HRDF payments by employers and employees until the end of 2020.
6. Monthly financial payments on business loans and or any other loans related to the running of the auto business to be given a grace period and at a reduced interest rate.
7. The reduction or abolishment of corporate tax and personal tax for at least six months.

The above requests might fall on deaf ears as the government’s first priority is to flatten the Covid-19 curve and keep Malaysian citizens safe and alive.

However, with new car sales expected to see a 70 to 80% fall in the coming months, the number of Malaysians financially affected will be very high.

Showroom closures and job losses are just the tip of this looming economic iceberg.

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