Jump start for Malaysian auto industry after MCO is lifted

By CARSIFU | 15 April 2020

PETALING JAYA: The movement control order (MCO), implemented since March 18 to control the Covid-19 pandemic, has resulted in devastating impact to the country’s automotive industry with the shuttering of vehicle plants, car showrooms and service centres.

Initially scheduled to end on April 1, the order has been extended twice and will be lifted on April 29.

The automotive industry is a major pillar of the economy, with a 4.3% contribution to Malaysia’s gross domestic product (GDP) in 2019, according to the Ministry of International Trade and Industry (MITI).

Page2 (1) (Custom)

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said a proposal had been submitted to the government earlier this week, regarding post MCO jump-start measures for the automotive industry.

“We have submitted a proposal to both MOF (Ministry of Finance) and MITI. Among the measures proposed are easier hire purchase approvals, and lower taxes or duties for at least until end of this year. We have also requested for the calculation of the open market value (OMV) of a vehicle to be reverted to the previous formula, so that the duties imposed for locally assembled cars do not increase,” she told CarSifu.

Earlier this year, the Government had provided a deferment on the revised OMV formula until end-2020.

Aishah had estimated that prices of some locally assembled car models could increase as much as 15% to 20% with the revised OMV formula.

Regarding vehicle sales, Aishah said the total industry volume (TIV) would definitely drop this year.

“However, we cannot gauge the quantum of the drop in vehicle sales. The TIV would also depend on when the MCO would be lifted, and if the Government provides packages to stimulate the auto industry,” she said.

In January, the MAA had forecasted TIV in Malaysia to hit 607,000 units this year, which is a slight increase from the 604,287 units recorded last year.

BRIEF CAPTION....introduction of latest new mazda model.

Meanwhile, CarSifu spoke to a few automakers in the country about their readiness to resume normal operations post MCO.

Mazda car distributor Bermaz Auto Bhd said the company had made plans and is well-prepared to resume normal operations once the MCO is lifted.

The Bermaz Auto spokesperson said the company had also prepared procedures and policies for sanitisation and hygiene practices at its service centres and showrooms.

As for Honda Malaysia, the company said it was still monitoring the on-going situation in the country.

Regarding sanitisation measures for Honda Malaysia’s operation sites and car dealerships, a spokesperson said: “We are currently studying all the precautionary measures. Once we are back in operation, we will ensure that our dealerships are safe and follow all the required guidelines for customer safety.”

Meanwhile, a UMW Toyota Motor spokesperson said new vehicle deliveries and service appointments have been affected due to the MCO.

“Together with our business partners, we are ready to start operations immediately after the MCO is lifted and we will ensure that customer services are expedited without further delay,” said the UMW Toyota Motor spokesperson.

UMW Toyota Motor also said the company’s priority was to ensure a safe environment for customers and staff.

“There will be additional measures taken to ensure that our premises are safe for our customers to visit and also for our staff to work in. These measures are taken not only at our premises, but also at our manufacturing plants where stringent operating processes have been put into place to ensure that our products are safe from contamination right from production and throughout the logistics stages of vehicle production. We will implement this as a permanent measure.”

Regarding vehicle sales this year, the company is expecting weaker consumer sentiment for at least six months.

Page2 (6)

An industry observer said dealerships are facing difficult times as most auto shows, walk-in sales, delivery and maintenance services are hampered by the nationwide MCO.

“Those with higher inventory levels are facing additional costs including loan repayments, thus locking up their capital,” he said.

Other factors affecting car distributors and manufacturers are high operating expenses, weaker economic growth outlook with the rising inflation, lackluster consumer demand and weaker ringgit in 2020.

“Most car brands in Malaysia have shown a decline in numbers in the last three years and this is not good for the industry,” he said.

He also said that once the MCO is lifted, the local industry should spur domestic consumption by promoting walk-ins to showrooms and service centres via new innovative ways of doing business and connecting with customers.

“Even market leaders have to re-strategise to fit the situation, despite reporting losses or smaller revenues,” he said.

He said auto makers in China had presented their wish list to the government which includes cuts to the purchase tax on smaller vehicles, measures to support sales in rural markets, easing of car emission requirements, extending subsidies for new energy vehicles and expand investment in infrastructure such as charging stations.

The observer also said the South Korean government in helping its auto sector, had promised to speed up customs clearance, arrange freight transportation and provide liquidity support for the industry which employs about 12% of the country’s workforce.

He added that the American auto companies also had sought for the US government to delay the implementation of new rules requiring higher local content in cars in order to qualify for zero tariffs.