Typically though tough economic conditions tend to be a boon for companies like Perodua as consumers would steer their spending to cheaper vehicles. During the financial crisis of 2007/2008, Perodua achieved one of its best sales with the company recording the most bookings in its 15-year history in July 2008.
“We were in Nirvana then,” says its managing director Datuk Aminar Rashid Salleh. But it is a different story now. The leading automotive company with a 35% market share is experiencing a slowdown in sales with an almost 17% year-on-year drop as at April 2016.
Perodua expects to chalk up weaker sales of just above 200,000 units this year against 216,000 units last year. Following suit, another local automotive company, Perusahaan Otomobil Nasional Bhd (Proton) is also experiencing slumping sales. Other popular foreign brands such as Toyota, Honda, Nissan and Mazda have also been impacted.
Malaysia Automotive Association (MAA) forecasts Malaysia’s total industry volume (TIV) to drop by 2.5% to 650,000 units in 2016 against last year. This will be a shock to the automotive industry that grew for six consecutive years from 2010, and peaked at a new all-time TIV high of 666,674 units last year, albeit at a marginal increase of 0.03% against 2014’s TIV.
MIDF Research has also trimmed its 2016 TIV by 6% to 626,633 units while 2017 TIV is reduced by 3% to 632,899 units from 653,098 units previously. The changing consumer behaviour might be influenced by the implementation of the goods and services tax (GST) in April last year. Since then, people have been holding back purchases.
According to research company Nielsen, Malaysian consumers’ saving intentions are one of the highest globally. About one third of Malaysians are focused on building their financial nest by channelling extra cash towards investing in shares or in mutual funds while two in five respondents use any extra monies to clear debts, credit cards or loans, Nielsen says.
Saving intentions among South-East Asian consumers continue to be a priority. The region’s consumers are the world’s most avid savers with all six countries securing the top 10 spots globally when it comes to saving. On average, only half of global consumers prioritise saving any spare cash.
“With no real changes in the economic outlook, Malaysians’ confidence remains low and we see that this trend will continue to be the case until the pressure on ringgit eases. Only when the pressure on ringgit improves can consumers start to feel the burden of their day-to-day spending lessen,” says Richard Hall, country manager of Nielsen Malaysia.
The survey by Nielsen also reveals that consumers in Malaysia would continue to reduce household spending even when economic conditions improve with nearly nine in 10 Malaysian consumers changing their spending habits in the past year to improve savings.
The top three areas where consumers in Malaysia will continue to cut back even when economic conditions do improve are spending less on new clothes, reducing out-of-home entertainment and switching to cheaper grocery brands.
Other than economic factors, the emergence of on-demand or ride-sharing transport services such as Uber and improvements in public transport also have their fair share of influence in the slowdown of private vehicle sales.
Uber Malaysia Sdn Bhd, a fully-owned subsidiary of Uber Technologies Inc, was launched in Malaysia in January 2014 with the premium offering Uber Black and low-cost option Uber X introduced in August 2014. It now has over 20,000 active driver partners and 200,000 unique riders, the majority of whom are in the Klang Valley.
Another mobile based ride-sharing service Grab has introduced a carpooling app which offers cheaper rides while helping to ease traffic congestion. Besides reducing fares by between 50% and 85%, the carpooling service would help ease traffic congestion and reduce pollution in the long run.
According to a study by Nielsen, Malaysia has the third highest car ownership globally, where 93% of households own at least a car and 54% have more than one car.
The app will allow registered GrabHitch drivers to key in their routes to match with potential passengers for a deal to be struck based on mutual consent. The Grab app has been downloaded on more than 15 million smartphones with 270,000 vehicles registered under the Grab network in six countries in the Asean region.
On top of that, Malaysia or specifically Kuala Lumpur public transport services have also been improving with the new light rail transit (LRT) extensions and two new lines of mass rapid transit (MRT) systems.
The operator of urban train system, Prasarana Malaysia Bhd, is expecting to serve 1.5 million commuters each day by the middle of next year.
The increase from the current one million commuters a day would come from the full completion of the LRT extension programme that connects the Kelana Jaya and Ampang lines by next month as well as the opening of the first phase of the Klang Valley MRT from Sungai Buloh to Semantan (12 stations) this December.
