PETALING JAYA: Budget 2025 will affect car buyers’ sentiment and determine auto sales for 2024 and into next year, depending on the incentives for the electric vehicle (EV) segment, which will be keenly watched.
Industry analysts said if the budget offers an extension or fresh incentives to sustain or accelerate the EV transition, it could lead buyers to delay purchases into 2025 as they await new launches.
“Total industry volume (TIV) is up some 4% year-on-year (y-o-y) in the nine months of the year at 594,000 despite the weaker TIV figure for September and it looks set to match the near 800,000 figure in 2023.
“Fourth quarter sales could be determined to a point by the budget as any incentive offered by the government could see a delay in buying.
“Despite that, the aggressive promotions to be rolled out by the main players like Perodua and Proton to attract buyers in the final quarter would determine if the TIV target can be reached,” said an industry executive.
The Malaysian Automotive Association (MAA) has forecast a TIV of 765,000 for this year as compared to the record 799,761 units sold in 2023.
According to MAA, September TIV dropped by 19.8% month-on-month (m-o-m) and 13.4% y-o-y to 58,000 units due to the planned shutdown for maintenance at companies like Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and slower sales delivery for certain brands.
Nevertheless, on-year TIV remained up 3.9% mainly driven by improved production by Perodua and stronger demand for newly launched models by Honda.
The MAA number did not include EV sales by non-member like Tesla and other entrants, whose sales numbers are captured by the Road Transport Department.
Tesla is estimated to have sold some 4,300 units in the nine months of the year while total EV and hybrid vehicle sales totalled 32,900.
EVs sales account for about 3% of market share but is set to grow, once Proton Holdings Bhd (Proton) and Perodua launch their own EVs and the infrastructure to support the electrification of the auto market here is established.
Without the TIV contribution from national car manufacturers, sales by other major brands in the local market is roughly between 200,000 and 300,000 units. This is where the tussle for market share will be more intense in the short term.
Aggressive price cutting and the advanced technology of Chinese EVs, according to industry watchers, will eat into sales of Japanese, South Korean and continental car makers here and less so on local makes which target the mass market at lower prices.
“Everybody is waiting to see what will happen after 2025 when the government opens up the auto market further and the floor price on completely built EVs is scheduled to be removed.
“The Chinese automakers are very aggressive and some have deep pockets to cut prices.
“With the quality of their cars I won’t be surprised to see more buyers prepared to pay a little more to buy a BYD for instance,” said the industry executive.
Hence, for Budget 2025 which is to be tabled today by the Prime Minister Datuk Seri Anwar Ibrahim, who is also the Finance Minister, the MAA has requested for an extension of the road tax exemption incentive for EVs (that will expire at the end of 2025) and for the incentive to be offered to hybrid electric vehicles (HEVs).
The association, which represents many of the motor vehicle distributors, assemblers and manufacturers in Malaysia, has also proposed the import duty on batteries for EVs and HEVs be abolished.
Currently, there is a 20% import duty in place on batteries for EVs and HEVs.
A local automotive sector analyst said the impact from the proposed pay hike to civil servants may be limited with some of them likely to upgrade their cars but this would not lead to a growth in TIV in 2025.
“The pay hike won’t lead to an expansion in the market size as some may opt to use any discretionary income to upgrade. We think TIV next year should ease to about 660,000 as the sector normalises post pandemic,” she told StarBiz.
HLIB Research said auto industry sales volume would sequentially pick up in the coming months due to the still high order backlogs for Perodua and more aggressive sales campaigns being rolled out by the various original equipment makers.
The research house noted the stronger ringgit augured well for the sector, potentially offsetting the higher operating cost environment in the fourth quarter.
The September data from MAA showed national passenger vehicle sales dropped 26.6% m-o-m and 15.8% y-o-y with Perodua’s sales down 31.8% on-month and 18.3% y-o-y.Non-national passenger vehicle sales totalled 18,400 units in September, which was down 7% m-o-m and 10.5% y-o-y.
Among major brands, Honda’s sales fell by 20.5% m-o-m and 9.8% y-o-y while Nissan experienced a 9.1% m-o-m decrease and a 40.3% drop y-o-y.
Toyota’s sales fell by 7.3% m-o-m and 13.2% y-o-y while Mazda saw a 13.4% m-o-m decrease and a 34.6% decline y-o-y.
Despite the poor September showing most brokerages including TA Research maintained a “neutral” rating on the sector as its order backlog of about 160,000 units offer earnings visibility.
Kenanga Research noted the implementation of e-invoicing is having lesser impact to car sales than initially believed while automakers are racing to provide discounts and rebates to offset the issue and ensure sustained demand.
E-invoicing essentially will cease the common practice of providing 100% hire purchase financing (under the Hire Purchase Act 1967, customers are required to make a minimum down payment of 10%). — BHUPINDER SINGH
