PETALING JAYA: Vehicle sales are off to a good start with June marking the strongest monthly total industry volume (TIV) growth and potentially indicating a positive start to the second half of 2020.
MIDF Research, in a report, noted that 44,695 units were registered in June, representing a 5.1% and 95% year-on-year and month-on-month (m-o-m) growth respectively.“
The recovery in June numbers underpin our bullish turn on the auto sector following the announcement of the sales tax-holiday that commenced on June 15.
“Car prices have generally been reduced by between 2% and 7%, given savings from the sales tax exemption incentive.
“As we had highlighted in our recent sector upgrade, the three-months tax-holiday in 2018 lifted TIV during the period by 21,000 units per month, relative to our conservative assumption of a 7,800 units per month increase against our base 2020 assumption from the second half 2020 tax-holiday.”
For the time being, MIDF Research said it is sticking to its target of 554,000 units, which represents an 8.3% year-on-year contraction, adding that the trend so far has been encouraging.
“Notwithstanding dented consumer sentiment, given the impact of movement control order to contain the Covid-19 pandemic, the strong combination of tax holiday-induced demand and robust liquidity created for consumers from various stimulus measures transfer massive amounts of cash into the consumers’ pockets.”
The research house added that a low interest rate environment will also serve as are strong catalyst to drive a rebound in vehicle-buying sentiment.
Under the Short-Term Economic Recovery Plan (Penjana) announced by Prime Minister Tan Sri Muhyiddin Yassin last month, locally-assembled cars will be fully exempted from sales tax while for imported cars, the sales tax will be cut from 10% to 5%, until Dec 31.
TA Securities in a report earlier this week said it did not expect the proliferation of car sales during the tax holiday period in 2018 to repeat this time due to absence of pent-up demand, which was seen in the last tax-holiday period.
“The weakening consumer sentiment and stringent hire-purchase loan requirements may dampen TIV growth. As such, we keep our TIV forecasts for 2020 unchanged at 431,000 units, or a 29% decline year-on-year due to the challenging market condition.”
TIV in the first half of 2020 plunged 41.1% to 174,675 units from 296,317 units in the previous corresponding period, as a result of economic disruptions resulting from the country’s movement control order to curb the spread of the Covid-19 pandemic.
Last week, the Malaysian Automotive Association (MAA) announced that it was revising upwards its vehicle sales target for the year by 17.5% to 470,000 units, as the grim economic outlook is likely to be buffered by the various incentives recently announced by the government.
Nevertheless, the projection would not only mean that sales this year would be a 22% contraction from 2019’s 604,287 units sold. It would also be the first time in 13 years since TIV failed to surpass the 500,000-unit mark.
In April, the MAA revised downwards its 2020 TIV forecast to 400,000 units from the 607,000 units it had projected in January.