KUALA LUMPUR (June 15): Some of the headwinds facing the automotive sector, such as rising car prices, potentially tighter financing, a weak Malaysian ringgit and a growing number of car owners, are expected to persist through 2023, according to RAM Ratings.
Speaking during a virtual ‘RAM Insight Series’ webinar: The Malaysian automotive sector – Is the worst over and where do we go from here? On Wednesday, June 15, RAM Ratings analyst Ben Inn said the automotive sector faces many uncertainties.
“Unfortunately, many are negative [in terms of uncertainties and regulatory factors]. On the regulatory front, even though the sales tax exemption is extended, we currently don’t see it extending until 2023.
“In addition, there is the new MITI [Ministry of International Trade and Industry] calculation of excise tax and the possible reintroduction of GST, which could also have its own zero-rating period,” he said.
The analyst added that car prices are likely to continue to rise, which is largely unavoidable due to rising raw material, parts and logistics costs exacerbated by the weak Malaysian ringgit.
“Many manufacturers in the [automotive] sector are very sensitive to forex [foreign exchange] fluctuation. In addition, consumer demand for cars will also be dampened by higher inflation, concerns about the economy, potentially tighter funding and the higher cost of owning a car due to rising rates. interest rates and the rationalization of fuel subsidies.
Meanwhile, during the roundtable, Bermaz Auto Bhd Group Managing Director and Executive Director Datuk Francis Lee Kok Chuan said the Malaysian Automobile Association was pushing for another round of vehicle tax exemptions. sales and services (SST) until the end of 2022.
And if the SST exemption is extended, the industry’s total volume could further increase to about 630,000 units by 2022, according to RAM’s Inn.
The SST exemption was originally due to end on December 31, 2020, but has been extended three times – first until June 30, 2021, then until December 31, 2021 and most recently until June 30 this year. The exemption was introduced as part of Penjana’s recovery plan to mitigate the impact of the first Covid-19 movement control order, which came into force in March 2020.
However, if the SST exemption is not extended, Bermaz Auto does not expect a drastic drop in demand for cars.
“If the SST exemption is not extended, there will be a knee-jerk reaction. But I think things will normalize a bit after a few months,” Lee added.