Used-car sales expected to slow in 2023

PETALING JAYA: While 2022 has been a remarkable year for both new and used-vehicle sales in Malaysia, stakeholders are expecting a slowdown in 2023 due to anticipated slower economic growth and further interest rate hikes, as well as dampened consumer sentiment as a result of inflationary pressures.

Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor tells StarBizWeek that November and December 2022 had seen a slowdown in used car transactions.

“The first three quarters did very well (used car sales).

“The third quarter started seeing a slowdown, perhaps due to interest rate hikes and dampened consumer sentiment as a result of inflationary pressures,” he says.

Moving forward, Khor thinks that used car sales will be stable in 2023, as even during recessions or slower economic growth, used cars offer attractive options for budget-conscious consumers.

Homegrown digital used car ecosystem myTukar chief executive officer Derrick Eng tells StarBizWeek that the company anticipates a challenging 2023.

“Internally, we continue to work towards sustainable business growth in 2023. We remain committed to delivering mobility solutions, alongside our sister company – Genie Financing and partnering financial institutions,” he says.

Automotive sector analysts have predicted that the total industry volume (TIV) for new vehicles in 2022 will end up at a record high.

In recent reports, Kenanga Research projected a record-breaking TIV for 2022 at 680,000 new vehicles.

Hong Leong Investment Bank Research, meanwhile, raised its 2022 TIV target to 700,000 units.

The outlook for 2023, however, is less rosy.

RHB Research said TIV will “soften” by 14% to 600,000 new vehicles in 2023 due to slower economic growth and the absence of the sales and service tax (SST) exemption.

According to Khor, the nation’s used car market sees about one million transactions annually, with 60% for the wholesale market, and 40% for the retail market.

The used cars’ wholesale market is the business-to-business or B2B trade where used car dealers obtain stocks for their dealerships.

Khor says this year, the retail (used cars sold to consumers) market has grown by almost 12%.

“It has been a good year – double-digit growth (for the consumer/retail market),” says Khor, adding that more car buyers and sellers are taking advantage of the ease of using online platforms such as ezauto.my – an automotive digital marketplace set up by FMCCAM in 2019.

“There is also pent-up demand this year, after lockdowns due to the pandemic and also arising from the loan moratoriums and special Employees Provident Fund withdrawals.

“Due to the pandemic, consumers also prefer owning a car, as they may have health-related concerns about being in crowds on public transport,” he says.

Meanwhile, myTukar saw its retail volume nearly doubling – growth of 93% – in September to November 2022 compared with the same three months in 2021.

The most sought-after cars on myTukar are from national brands Proton and Perodua, followed by Japanese brands such as Honda and Toyota.

Eng also notes that with improved deliveries of new cars in recent months, there has been an increase in people selling their cars.

“The used car industry is cyclical, and we work together in a symbiotic relationship,” he says, pointing out that myTukar’s ecosystem covers retail, financing, insurance, after-sales, refurbishing and trade-in, as well as wholesale.

He explains that the beginning of 2022 saw delays in new car deliveries, resulting in higher demand for used cars, despite inventory slowing down due to people holding off on selling.

“The SST exemption that ended in June also stimulated another peak for myTukar, on the back of a successful first half,” says Eng.

Sales at myTukar grew nearly 76% quarter-on-quarter (q-o-q) in the first quarter of 2022, and nearly 29% q-o-q in the second one.

Meanwhile, www.carexpert.com.au reports that Australia’s used car prices have been falling for six straight months, although they remain vastly more expensive than they were pre-Covid.

Citing a Moody’s Analytics report, the motoring portal says used car price declines were mainly due to improving global supply chains, especially for semiconductor chip supply.

Moody’s adds that there are “increasing demand-side pressures growing in the Aussie vehicle market”, alluding to inflation and interest rate hikes, and a reduction in buying power.

“Price weakness is expected to continue through 2023 as the market looks to find true equilibrium prices.

“Still, valuations are not expected to come back to where they were before the pandemic.

“The market will continue to pull back at a relatively modest pace as inventories slowly build,” the report states.

“If global economic malaise causes the Aussie economy to perform worse than expected, drastic declines in demand will push prices down further and faster than expected,” the report adds.

In the United States, www.cnbc.com reports that wholesale prices of used vehicles had hit their lowest level in more than a year during November 2022.

This was as retail sales declined amid interest rate hikes, rising new vehicle availability and recessionary fears.

Retail prices for consumers traditionally follow changes in wholesale prices.

The global business news channel also notes that the Manheim Used Vehicle Value Index, which tracks prices of used vehicles sold at its United States wholesale auctions, had declined about 16% from record levels in January.