CGS-CIMB Research in a report yesterday said it is maintaining its 500,000 units total industry volume (TIV) sales forecast for 2021, which is in line with the Malaysian Automotive Association’s (MAA) target for this year.
“Our 500,000 TIV forecast implies a 5.6% year-on-year decline in 2021 due to sales volume falling 3% and 10% year-on-year for national and non-national brands, respectively.
“While we foresee improving TIV in August and September due to the reopening of the auto sector, we still expect TIV in the third quarter of this year to contract by 7% quarter-on-quarter and 41% year-on-year.”
With the reopening of economic activities, including sales and production of motor vehicles under phase one of the National Recovery Plan from Aug 16, especially for key states like Selangor and Kuala Lumpur, Kenanga Research said it expects car sales to recover.
It added that sales would also be boosted by the growing number of back-logged bookings for popular models.
“We keep our 2021 TIV target at 460,000 units, tracking behind MAA’s 2021 TIV target of 500,000 units.
“We expect a stronger recovery next year, with a 2022 TIV target of 600,000 units, closely in line with MAA’s TIV target of 605,000 units.”
Kenanga Research said its 2022 TIV growth will be driven by the expected recovery in the economy post lockdown and the assumption that herd immunity would be achieved by then.
By then, the research house said the resulting relaxation of standard operating procedures toward revitalising local travel should push demand for passenger vehicles, especially the affordable national marques.
“Additionally, a few automakers have assured commitment to absorb the sales tax exemption beyond December 2021,” it said.
The government announced a vehicle sales tax exemption in June 2020 under the short-term economic recovery plan (Penjana). The exemption was initially supposed to last until the end of last year.
However, it has since been extended until Dec 31, 2021.
Under the initiative, locally-assembled cars are fully-exempted from sales tax while for imported cars, the sales tax has been reduced from 10% to 5%.
Meanwhile, RHB Investment Bank said it expects supply chain issues to plague recovery in the second half of 2021, which could directly impact sales volumes.
“Finished goods inventory is likely to continue declining in the following months.
“Distributors with enough finished inventory can continue to fulfil new orders, but those with long waiting lists will likely be unable to do so.
“The sales tax exemption should cushion the loss of sales during the full lockdown and keep demand buoyed, coupled with the low interest rate environment amidst the production bottleneck,” it said.
