Industry observers believe that consumers may opt for smaller engine capacity vehicles or more fuel-efficient vehicles during times of uncertainty.
“In an economic slowdown, people tend to downgrade towards cheaper, more fuel-efficient vehicles. This would bode well for the local car companies, ” said an analyst who tracked the sector.
Total vehicle sales plunged 99% year-on-year to 141 units in April, as the government’s movement control order (MCO) forced all automotive companies to cease operations during the month.
Year-to-date April, total vehicle sales for 2020 stood at 106,601 units, compared with 192,971 units in the previous corresponding period.To tackle the rise in Covid-19 infections in the country, the government implemented the MCO on March 18. On May 4, a conditional MCO (CMCO) was enforced to allow businesses to re-open to recover the economy. The CMCO has been extended to June 9.
Year-on-year, Perodua’s market share dropped 1% to 42% in the first four months of 2020, while Proton’s year-to-date April 2020 market share increased to 20% from 13% in the previous corresponding period.
Year-to-date April 2020, the total market share of the national car companies grew to 63% from 54% in the previous corresponding period, while the total market share of the non-national marques shrank to 37% in the first four months of this year compared with 46% last year.
Kenanga Research in a report, however, said it expects national marques to fare less favourably compared with the non-national marques, as the target market of local brands tends to be consumers within the lower to mid-income group - the segment that is most financially distressed during an economic downturn.
“Furthermore, the planned new launches for the second-half of 2020 could be delayed, given the weak consumer sentiment.
“But some relief could arise from the better incentives programme under the National Automotive Policy 2020 and positive impact from Bank Negara’s overnight policy rate cut and pre-emptive measures to assist those who might be financially challenged by the Covid-19 impact.”
The research house noted that the units registered in April were only a statistic from the Road Transport Department’s (JPJ) e-Daftar system, with no actual delivery, as all the marques’ showrooms, vehicle productions and deliveries were temporarily closed, halted and delayed from March 18 to May 12, with some showrooms only gradually re-opening from May 4. “Note that the official document from JPJ can only be retrieved starting May 13 for vehicle collection.
“The registrations that were carried out were for vehicle purchases in which car loans had already been approved pre-MCO, along with an issued letter of undertaking, and the completion of the registration was so there would be no lapse in the agreement, which would entail going through the whole process again.”
Kenanga Research, however, said the registered vehicles would not have physical documentation or road tax. With the car companies’ facilities closed, buyers would have had no avenue to collect the vehicles, rendering them mere statistics in the system.
Going forward, Kenanga Research said the final impact would depend on the outcome of containment measures and whether the movement restriction would be extended.
Separately, MIDF Research said a recovery post-MCO is likely to be pushed back, given the implications on job security, wage outlook and consumer sentiment, adding that consumers would have likely shifted into ‘survival mode’ now with little priority for discretionary spending.
“The sector is likely to be dominated by negative news flows and datasets in the near term. Earnings pressure is compounded by a weak ringgit and potential discounting post-MCO.