Subdued vehicle sales seen in Q4, recovery likely in December

PETALING JAYA: Fourth-quarter vehicle sales are expected to be subdued, as consumers continue to adjust to the new sales and service tax (SST) environment.

However, research house CGSCIMB said in a report it is cautiously optimistic for a stronger recovery in December, due to upcoming new model launches and yearend promotions.

“Overall, we still project a tepid 1.8% total industry volume (TIV) growth in 2018, driven by stronger sports-utility vehicles and passenger car sales on the back of multiple new model launches.”

Additionally, the research house said it expected weaker fourth-quarter earnings due to lower TIV and unfavourable foreign exchange movement.

Kenanga Research also projected a lessthan-stellar outlook for the auto sector in the final quarter of 2018.

“Sales volume for October 2018 is expected to be flat, as consumers are still adjusting to the new SST environment.

“Nevertheless, we expect TIV will recover in November and December buoyed by the usual year-end promotion and upcoming special event, The Kuala Lumpur International Motor Show 2018, which will be held after a five-year of hiatus.”

With the new SST gazetted on Sept 1, 2018, Kenanga Research pointed out that vehicles are charged 10% in sales tax at the vehicles manufacturing level.

This is only on fully-built vehicles, while completely-knocked-down (CKD) parts are exempted.

“Nevertheless, from the recent announcement by certain carmakers, the prices for the locally assembled and CKD units have dropped by 1% to 3% (compared with 6%-rated GST), whereas the prices for the completely-built-up units have increased by 1% to 3%.”

Despite car prices falling by 2% to 3% postSST, MIDF Research said it still expected demand to normalise after an exceptionally strong period from June to August.

“Purchases have been brought forward as consumers took advantage of the tax-holiday period.

“Most auto players have already, or are close to, hitting full-year targets, suggesting little reason to embark on the typical yearend sales campaigns.

“We expect the market to dry up in the fourth quarter of 2018, before normalising in the first quarter of 2019.”

Vehicle sales fell in September after the goods and services tax (GST) holiday ended on Aug 31 while stocks of some vehicle distributors were depleted, according to the Malaysian Automotive Association.

It said on Monday sales volume in September fell 23% or 9,715 units from a year ago to 31,241 units.