Auto industry: Banner year, driven by govt incentives - MIDA | Malaysian Investment Development Authority
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Auto industry: Banner year, driven by govt incentives

Auto industry: Banner year, driven by govt incentives

08 Dec 2020

The automotive sector was among the biggest winner of the government stimulus plans, turning 2020 into a banner year for the segment, despite the unprecedented economic challenges following the COVID-19 pandemic.

Against all odds, the domestic car manufacturers outperformed market projections from earlier in the year and managed to pull in record sales, underpinned by government incentives and new model launches as volume growth drivers.

The sector started somewhat gloomy in the first quarter (Q1), as sales were affected by the implementation of the Movement Control Order (MCO).

But the economic stimulus measures implemented by the new Perikatan Nasional-led government, apparently fuelled the automotive recovery.

A six-month loan moratorium under the Prihatin Rakyat Economic Stimulus Package (PRIHATIN) unveiled on Feb 10, for the April 1-Sept 30 period, spurred consumer spending and triggered sales, especially for low-end models.

Sales of new and used cars of most major brands began to record encouraging numbers entering Q2.

The PRIHATIN scheme, together with the National Economic Recovery Plan (PENJANA), unveiled on June 5, which helped restart the economy after a soft patch amid the MCO and Conditional MCO, were factors that have boosted sales and the total industry volume (TIV).

For the automotive sector, PENJANA offered a 100 per cent sales tax exemption for passenger vehicles, sports utility vehicles (SUVs) and Completely Knocked Down (CKD) multi-purpose vehicles (MPVs), as well as a 50 per cent sales tax exemption for Completely Build Up (CBU) passenger vehicles, SUVs and MPVs from June 5 to Dec 31.

Bank Negara Malaysia (BNM), meanwhile, cut its overnight policy rate (OPR) by 50 basis points (bps) to 2.0 per cent a month earlier (May 5) and another 25 bps to a record low of 1.75 per cent (July 7).

The low-interest-rate environment, coupled with the PENJANA’s tax holiday, triggered more new sales.

Sales of vehicles in June 2020 was higher at 44,695 units from 42,586 units in June 2019.

For the first half of 2020 (H1 2020), TIV stood at 174,675 units, but still a 41.1 per cent decline from 296,317 units in H1 2019.

As the country entered H2 2020, the Malaysian Automotive Association (MAA) revised its TIV projections for the whole year to an estimated 470,000 units, from its previous estimates of 400,000 units announced in April. This, according to industry observers, still a respectable figure, given the challenging economic climate and new normal operating procedures brought about by COVID-19.

Without such (pandemic) risk, Malaysia’s TIV grew 1.0 per cent to 604,287 units in 2019 from 598,589 units in 2018.

The Malaysian Association of Car and Credit Companies (FMCCAM), meanwhile, reported incentives from the government during the MCO, especially the tax holiday and moratorium, drove used car sales since June.

Sales of used cars, especially those priced below RM30,000, soared over 100 per cent in H1 2020 as the PRIHATIN’s moratorium announcement stoked leeway on car hire purchase.

The FMCCAM, which manages 4,325 dealers under its umbrella, said used vehicles have become the industry’s hottest commodity as consumers prefer to drive their own car during the pandemic and buy used to save money in the uncertain economic climate.

The association noted that demand for used vehicles accelerated into the third quarter (Q3) with the majority of dealers continuing to register a strong sales recovery, with year-on-year (y-o-y) July sales improved over 25 per cent to 37,800 units, while both August and September registered over 17 per cent y-o-y growth.

Buying sentiment in Q4, however, looks more cautious as the moratorium incentive ends.

However, the introduction of new models and some refreshment of existing variants, as well as end-of-year deals and sales campaigns, continue to boost the market.

The brisk business extended in Q4 over virtual launches of popular models such as the new Nissan Almera Turbo (Sept 5), the fifth-generation New Honda City variants on Oct 13, the Proton X50 SUV (Oct 27), and the Mitsubishi Xpander seven-seater crossover MPV (Nov 27).

As 2020 draws to a close, domestic car manufacturers continue their growth trajectory towards a strong year-end finish.

Perusahaan Otomobil Kedua Sdn Bhd (Perodua) sold over 195,000 cars as of end-November 2020 and reportedly is on track to meet its 210,000-unit year-end registration target, while Proton Holdings Bhd sold 96,410 units (2020’s target: 132,000 units).

Meanwhile, the Institute of Automotive, Robotics and IoT (MARii) said the review of incentives under the National Automotive Policy (NAP) 2020 to ensure speedy recovery of important industries that drive the country’s economy faster after COVID-19 has been finalised and is now awaiting the government approval before it can be announced later.

The move will see existing incentives under the NAP 2020 to be streamlined according to current needs, thus enabling automotive participants to reap the benefits of post-COVID-19 appropriately.

Source: Bernama