Car prices may increase by 2% when 8% SST imposed, says Sime Darby

KUALA LUMPUR: Sime Darby Bhd will adopt a wait-and-see approach on the increase of the sales and service tax (SST) to 8% from the existing 6%, group chief executive officer Datuk Jeffri Salim Davidson said.

He said the group did not expect the impact of the new SST implementation would be massive to the car industry but sees the possibility of higher car prices in the future, if prices of components in car manufacturing were to also increase.

"The theory is that car prices will go up by two per cent. We have other factors that come into play so it is difficult to say the profit is two per cent. But the underlying demand for cars in Malaysia is still strong. So we will see the impact,” he told a media briefing on Sime Darby's financial results for its second quarter ended Dec 31, 2023 here on  Wednesday.

During the tabling of Budget 2024 last year, Prime Minister Datuk Seri Anwar Ibrahim announced that the SST rate in Malaysia would be increased to 8% from 6%, though it would not include food and beverages or telecommunications.

Concurrently, Sime Darby group chief financial officer Muhammad Noor Abdul Aziz pointed out that all industries will be affected with the SST implementation, not just Sime Darby.

"This sales tax increase also applies to everybody, and to all the automotive players. So, we see this as a cost of doing business and it's a new playing field… that's how we view it. In terms of demand, it depends on market forces,” he added.

For the financial year ending June 30, 2024, Sime Darby expects to record a profitable year on the back of several factors including UMW Holdings Bhd’s financial performance as well as taking into account the one-off RM2.0 billion gain from the disposal of Ramsay Sime Darby Health Care in December 2023.

Jeffri said Sime Darby has made a full exit from the healthcare business and this would allow the group to fully focus on the growth of its two core businesses - industrial and motor.

"Our operations are very cash generative. We have committed on dividends of at least 50 per cent to the shareholders. We need to fund that. We have also committed to borrowing payments as well as our capital expenditure projects. Our business is quite capital extensive and we have showrooms that we have upgraded,” he added.

Sime Darby said the significant jump in net profit was largely attributed to the RM2.0 billion gain on the disposal of Ramsay Sime Darby Health Care in December 2023.

Meanwhile, core net profit for the quarter, excluding the gain on disposal amounted to RM269 million, a 7.2 per cent improvement from the corresponding quarter last year.
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