PETALING JAYA: The automotive industry is expected to see a rebound in total industry volume (TIV) this year, say analysts.
The main reason is the sales and service tax (SST) exemption for vehicle purchases that is still in place, they said.
According to Hong Leong Investment Bank (HLIB) Research, TIV is expected to grow by 18.8% year-on-year (y-o-y) to 600,000 units in 2022.
This would be driven by the extension of the SST exemption until the middle of this year, the backlog of pent-up orders from 2021, new model launches in 2021 and early 2022, as well as the low base effect from last year.
However, sales in the first half of the year are expected to be much stronger than the second half, it said.
“The outlook in 2022 can be broadly categorised into two halves: a strong first half (average 60,000 to 65,000 units per month), driven by the SST exemption.
“This will be followed by a weak second half (averaging 35,000 to -40,000 units per month) due to the after-effects of the SST exemption ending, as car buyers would have brought forward their purchases,” HLIB Research said.
The research house said that this effect of bringing forward purchases was seen during the 2018 “tax holiday” from June to September when the goods and services tax was “zerorised” but SST had yet to be re-implemented.
“Any model introduced in 2022 may soften the negative impact of post-SST exemption,” HLIB Research said.
The research house said it expects a challenging second half of the year, with stiff competition to emerge across the board.
“Original equipment manufacturers will have to leverage on attractive new models and sales programmes in order to sustain sales,” it said.
Meanwhile, RHB Research said the full-year TIV figure for 2021 is likely to beat its forecast of 470,000 units, which implies a 13% y-o-y decline.
“Despite the robust 2021 performance, we leave our 2022 forecast TIV of 540,000 units unchanged as we expect much of the backlog to be filled this year.
“This is given the persistent chip shortage and earlier-than-expected extension of the SST exemption period,” it said.
RHB Research is also expecting a post-SST exemption hangover eventually in the second half of the year.
“The SST exemption should compensate for the loss of sales during the full lockdown and keep demand buoyed, coupled with the low interest-rate environment amidst production bottlenecks.
“Our view remains largely unchanged and we think the extension in SST exemption to June 2022 will not be as effective as before,” it said.
It reasoned that consumers intending to take advantage of the SST discounts would have already done so during the past 18 months.
“Beyond that, we expect TIV to taper off for a few quarters following the re-imposition of the SST, before resuming growth,” it said.
RHB Research is keeping its “neutral” call on the auto sector at this juncture, as it said near-term headwinds such as component shortage and the Covid-19 workplace threat are expected to remain.
HLIB Research also maintained its “neutral” call on the sector as it also noted that TIV is expected to normalise in the second half.
