Auto sales hit second highest in history in zero-GST period
KUCHING: Analysts are optimistic on sales of cars as total industry volume (TIV) in July 2018 accelerated to 68,000 units – its second highest monthly volume in the history of Malaysia.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw that demand for local cars last month remained strong.
“Riding on the joyful tax holiday promotions, Proton car sales increased to 8,000 units, its highest car sales volume for the last 30 months,” it said in a report yesterday.
“Similarly, Perodua’s July sales volume rose to 24,000 units, spurred by the popular demand for Perodua Myvi and other key models. This has driven Perodua’s total car sales for the first seven months of 2018 (7M18) to 141,000 units – up 19 per cent year on year (y- o-y).”
Likewise, the non-national carmakers’ July car sales rally continued to ride on the cheaper zero-rated Goods and Services Tax (GST) car prices.
Among the Japanese car marques, Mazda was the star performer in July 2018 – car sales rose by 71 per cent to 1,200 units, with 7M18 market share of 2.2 per cent.
AffinHwang Capital expected demand for Mazda cars to remain strong as Bermaz Auto, the official Mazda distributor, reaffirms its commitment to absorb the Sales and Service tax (SST) for bookings made before Sept 1.
Over in the premium market, Mercedez- Benz’ July car sales rose twofold to 1,600 units, which enabled it to secure 2.4 per cent share of the market.
Despite the strength in TIV in the past two months, Kenanga Investment Bank Bhd ( Kenanga Research) observed that share price of auto stocks have hardly moved.
“This is likely given anticipation of the weakness post-tax holiday period,” it said in a separate note. “Our channel checks suggests players expect weakness through September and October, a typical stock clearance-driven strength in Nov-Dec period and normalisation thereafter.
“Our recent meetings also suggest players are still divided on whether to continue compensating for an SST rebate for bookings that cannot be delivered before September 1.”
In 2017, GST collection was reported at RM44 billion which is a considerably larger amount compared to SST collection of RM17b ( back in 2014). The differential is essentially being put back into consumers’ pockets.
“We see this as a strong structural factor to lift consumer sentiment/spending power and drive TIV improvement beyond the temporary demand volatility during the transition from GST to SST,” it added.
Looking ahead, AffinHwang Capital believed August’s TIV will remain robust as the zero-rated GST period continues to draw consumers to take advantage of cheaper car prices.
“Despite the year- end promotion offered by respective car companies, we expect sales volume to soften in 4Q18 as consumers will briefly hold back on big-ticket purchases following a hike in car prices.
Hence, 7M18 TIV of 358,000 units is within expectations, accounting for 62 per cent of our 2018E forecasts.
“Our 2018 TIV forecast remains unchanged at 582,400 units as we expect the sector to benefit from the temporary boost from the cheaper zero-rated GST car prices and partly offset by the softer sales volume during 4Q18 (implementation of SST).”