This is in spite of the three-month “tax holiday” following the zero-rating of the goods and services tax (GST) from June 1, which resulted in an unprecedented surge in demand for cars.
MAA president Datuk Aishah Ahmad said car prices are expected to increase post-SST and impact the demand for vehicles.
“We do expect car prices to go up, as there will be a 10% tax imposition. This is higher than the GST’s 6%. In fact, when the GST was introduced (in 2015), car prices did come down a little,” she said at the association’s second bi-annual media briefing.
Apart from the SST, Aishah said stringent hire-purchase loan approvals would also have an impact on car sales.
An analyst with a local bank-backed brokerage said the sales momentum would slow down post-SST for one simple reason – because cars are more expensive.
“This will be apparent, especially among the middle-to-lower income group, as the savings being offered during the current tax holiday is substantial for them.”
He noted that Perodua is offering GST rebates of RM2,172 for a 1.0-litre Axia SE (auto) and RM3,114 for the best-selling 1.5-litre Myvi Advance.
“Savings of RM2,000 to RM3,000 is a lot for someone that can only afford a car below RM30,000 or RM40,000. Naturally, they would want to buy a car when prices are at their lowest.
“The loan rejection rate is also higher for this group of individuals,” he said, adding that it would be harder to apply for a loan when prices are higher.
Demand for cars surged following the zero-rating of the GST by the new Pakatan Harapan government from June 1. Many automobile companies announced zero-rated GST prices, which led to substantial savings for car buyers.
This tax holiday period is, however, set to end with the reintroduction of the SST in September.
On Monday, Finance Minister Lim Guan Eng announced that the provision of services would be taxed at 6% under the reintroduced SST, while the sale of goods would incur a 10% tax. Under the proposed SST bill, goods will be taxed at 10%, while the provision of services will be taxed at 6%.
Total vehicle sales increased 28% to 64,502 units last month, compared with 50,273 units a year earlier, bolstered by the reduction in car prices due to the zero-rated GST and Hari Raya-related campaigns and promotions.
On a month-on-month basis, vehicle sales jumped 50% from 42,983 units in May. In June, total vehicle sales grew to 289,714 units compared with 284,453 units in the previous corresponding period.
Many car companies were quick to announce their zero-rated GST prices and savings for car buyers, following the announcement by the new Pakatan Harapan government back in May that it was reducing the 6% GST to 0%.
“The TIV in May was very much lower compared with the same month a year earlier. This was due to the election and then the subsequent announcement on the GST being zero-rated,” said Aishah. “Following the announcement, many customers decided to hold back on the purchase and registration of vehicles.”
On expectations for July, Aishah said sales are anticipated to be on the same level as that of June, bolstered by zero-rated GST prices.
Total sales hit an all-time high of 666,674 units in 2015, then dropped almost 15% in 2016 before contracting further last year to 576,635 units.
