Chip shortage seen to affect new vehicle sales

Situation made worse by lockdowns in China

PETALING JAYA: The shortage and shipment delays of semiconductor chips, made worse by the recent lockdowns in China, have put the brakes on April’s production, and in turn, sales of new vehicles.

RHB Research noted that data from the Malaysian Automotive Association (MAA) indicated that April’s new car sales, or better known within the industry as total industry volume (TIV), stood at 56,213 units, down by 23.2% month-on-month (m-o-m).

“The year-to-date TIV of 215,965 units makes up 37% of our 580,000 estimate (MAA: 600,000) for 2022. Noticeably, in April, production which came in 9% lower m-o-m weighed on TIV, as the component shortage seems to have been exacerbated by China’s lockdowns,” it said in a report yesterday.

RHB expects the chip supply issue, a key component for use in a variety of electronics systems in making vehicles, to persist in the near future.

For 2022, the research firm maintains a TIV forecast of 580,000 units. Of the different brands, it said that Proton “seems to be hit especially hard by the chip supply issues, with sales volume falling 32% m-o-m and 43% year-on-year (y-o-y)”.

Meanwhile, Perusahaan Otomobil Kedua Sdn Bhd (Perodua) is managing the shortage better, with sales volume falling by only 4% m-o-m, and rising 26% y-o-y. However, the sales volume of Toyota and Honda fell 18% and 43% m-o-m.

“According to UMW Toyota, its chip shortage situation has improved, but it is now facing a shortage of other components. Thanks to Perodua’s resilience, the national marques’ passenger market share rose 9.2 percentage points m-o-m to 68% in April 2022,” it pointed out.

On the demand side, RHB said it gathered that it remains strong, going by customers continuing to place orders in the hopes of qualifying for the sales and service tax (SST) holiday or are betting on its possible extension.

“On the supply side, we opine that the component shortage will likely persist for months to come, and could worsen if more Chinese cities undergo lockdowns. Encouragingly, Proton has secured sufficient chips for production in May-june, and is rushing to fulfil orders before the end of the SST holiday,” it added.

Meanwhile, MIDF Research predicts that May sales could remain muted, but expects a strong bounce in June as supply gradually normalises.

“Positively, total industry production has been holding up well, rising 6.5% y-o-y in April 2022 at 54,734 units. Despite upward price revisions that have been seen in the auto market, waiting lists remain stretched at three to six months, underpinning further sector recovery in the immediate term,” it said.

The research firm said it maintains its projection of a 13% y-o-y recovery in 2022’s TIV to 575,000 units, assuming absence of any further pandemic-induced lockdowns and on the back of strong outstanding orders, notwithstanding potential short-term weakness immediately post-sales tax holiday expiry in June 2022, it added.

MIDF said its 2022 TIV projection is at the lower end of the pre-pandemic range to reflect the ongoing chip shortage situation and potential intermittent supply chain disruptions.

“The MAA has submitted an appeal to the Finance Ministry to further extend the sales tax exemption for new vehicles in light of the ongoing supply shortage situation

“Should this be successful, it would be an incremental positive for the auto sector, which could render further upside to projections,” it added.

“We opine that the component shortage will likely persist for months to come.”

RHB Research