Market players optimistic about 2014
WITH this year almost drawing to a close, the focus will be on the total sales tally for the year. According to forecasts by the Malaysia Automotive Association (MAA), new vehicle registration is expected to break the previous record of 640,000 units.
The final sales tally will only be tabulated at the end of January, and already market players are plotting the chart for the next year.
Despite MAA’s positive expectations for this year’s results, certain quarters have pointed out that the past few months have produced a number of speed bumps that might derail the association’s initial projection, which were announced in July this year.
For almost the entire month of November, car companies complained about glitches at the Road Transport Department’s (JPJ) new MySikap online vehicle registration, which has caused significant delays to their business dealings.
Usually, it would take a dealer about one or two days to register a new vehicle, but recent hitches in the system has led to many backlogs, stretching the time required to about a week.
Although the situation is gradually improving, Dave Lim Keat Hiin, Deputy President of the Federation of Motor & Credit Company Association of Malaysia – Kuala Lumpur and Selangor, says that the system is only expected to normalise by January next year.
Meanwhile, the best selling non-national brand Toyota, which accounts for about 15% of all new vehicles sold, has experienced a slow year.
In October, UMW Toyota announced that it is only expecting to sell 90,000 vehicles by the end of the year.
The target is significantly lower than the company’s recordbreaking performance in 2012, which saw 105,100 vehicles sold (excluding Lexus).
Company president Datuk Ismet Suki attributed the lower target to the phasing out of the previous generation of the Toyota Vios, the company’s top selling model.
The company had to sacrifice nearly two months worth of production for the Vios, as it retooled its assembly plant to cater to the new third generation model.
However, run-out sales promotion for its Corolla Altis model has been better than expected, resulting in a dearth of models between now and the all-new Corolla Altis model, to be launched in January.
On the financing front, several banks, especially the more prudent ones, are starting to tighten up on car loans.
Although there have been no changes to Bank Negara’s Responding Financing Guidelines limit of a nine-year tenure period with 90% margin, several banks are adopting a cautious approach going into the new year and are vetting borrowers under their own stricter internal guidelines.
Going into next year, macroeconomic indicators are pointing towards a mildly strong year ahead.
The Malaysian Institute of Economic Research (MIER) is forecasting a GDP growth of between 5 and 5.5% for next year, slightly higher than Bank Negara’s forecast of 4.5 to 5% for last year.
While these indicators seem healthy, MIER has cautioned against weakening private domestic spending, which is more relevant to discretionary spending like new vehicle purchases.
The result of MIER’s third quarter 2013 Consumer Sentiments Survey has shown a Consumer Sentiments Index decline of 7.7 points quarter-on-quarter, to settle a lower benchmark of 102.0 points, the lowest since the first quarter of 2009.
In the past, new vehicle sales in Malaysia have shown great resilience against a background of difficult economic conditions. Between 2010 and 2012, the Malaysian car market had set new sales records twice.
In 2010, total industry volume smashed through the 600,000 units per year barrier to register 605,156 vehicles.
Year 2012 raised the bar even further by registering 627,753 vehicles.
Much of this is attributed to easy availability of credit, which fuelled the country’s seemingly insatiable appetite for new cars.
For better or for worse, Malaysia’s practise of offering an unusually long maximum loan tenure period of nine years at low interest rates of between 2.5 and 3.5% is an anomaly when compared with other countries.
The subject of high car prices and the high dependence of private cars among Malaysians only serves to intensify scrutiny on the subject.
Still, Bank Negara is not expected to change its overnight policy rate (OPR) of 3%. “While the move is in line with the need to support growth of the economy, concrete measures for short-term stabilisation are urgently required, as the depreciating ringgit and weakening terms of trade affect domestic consumer prices and inflation,” says a source from MIER, in relation to Bank Negara’s policy of maintaining the flat OPR for so long despite healthy growth.
There could also be an intensifying struggle between Toyota and Honda in the coming year.
Of late, several Toyota models have come under intense competition and the brand risks losing market share, especially in the passenger car segment (Honda does not compete in the commercial vehicles segment).
Going into the new year, Honda is widely expected to shock the market with an offensive led by a series of competitively priced products.
The upcoming all-new fourth generation Honda City, which was recently previewed in India, is promising segment-leading cabin space and fuel economy, wrapped in a package that is the best looking in its class.
Expected specifications include legroom that matches vehicles positioned two classes higher, touch-panel automatic air-conditioning with rear airconditioning blower, eight-speaker audio system, plus an economical hybrid variant.
Other new models include a new hybrid variant of the Honda Accord, a very forward-looking third-generation Honda Jazz and a compact crossover derivative model called the Vezel.
An entry-level, seven-seater multi-purpose vehicle called the Mobilio may also be introduced.
The Mobilio is aimed at competing with the Nissan Grand Livina and Toyota Avanza.
Judging by the trend established by recent Honda models, industry players are bracing themselves for a price war with Honda’s upcoming offerings.
In March this year, Honda Malaysia ruffled some feathers when it introduced the fourth generation Honda CR-V at a lower price than the outgoing model – RM1,180 less to be specific.
It has always been a norm for car companies to marginally bump up prices of every successive new model, justifying that new models cost more to develop, because it is a better product and comes with more features.
However, in July, Honda Malaysia dropped a bombshell in the form of a locally assembled Honda Jazz and shocked the industry by pricing it at RM74,800, with a decent list of features to boot.
Finally in September, Honda wrapped up its new models with a ninth generation Honda Accord that starts RM3,000 below the previous entry price.
And this is despite offering a far more comfortable ride and much more features than the preceding model.
There is little reason to believe that the pace of price for upcoming Honda models will taper off next year.
Currently, all of Honda’s models that were launched recently including the Civic, CR-V, Jazz and Accord, are best sellers in their respective segments.
New vehicles sales are projected to hit a new record of 640,000 units this year.