KUALA LUMPUR: Malaysia’s automotive sector will be lacklustre without the extension of sales tax exemption as certain carmakers are facing supply disruption, industry officials and analysts said.
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The government’s decision to extend new vehicle sales tax exemption for six months would help to spur demand owing to a reduction in prices, they added.
Some, however, expect consumer sentiment to remain weak due to uncertain economic environment that may curb spending on big-ticket items.
As part of the short-term Penjana economic recovery plan to stimulate the economy, the government on Tuesday said it would continue providing full exemption on sales tax for new locally-assembled (CKD) units and 50 per cent exemption on sales tax for imported (CBU) cars until June 30 next year.
Currently, the sales tax for vehicles is set at 10 per cent for both locally assembled and imported cars.
The news pushed automotive stocks higher on Tuesday and today.
Shares of UMW Holdings Bhd gained 1.18 per cent or four sen to end at RM3.44, Bermaz Auto Bhd rose 0.69 per cent or one sen to RM1.46 and MBM Resources Bhd added 0.87 per cent or three sen to RM3.47.
Tan Chong Motor Holdings Bhd gained 3.23 per cent or 4 sen to RM1.28 and Sime Darby Bhd added 2.17 per cent or five sen to RM2.35.
DRB-HICOM Bhd, which rose 6.97 per cent or 14 sen to RM2.15 on Tuesday, eased 2.33 per cent or five sen to close at RM2.10.
Proton Holdings Bhd sales and marketing vice president Roslan Abdullah said the move would drive more bookings for the national vehicles.
“It will benefit the overall automotive industry supply chain. This will help the industry to sustain its operations without additional support from the government except the Sales and Services Tax exemption,” Roslan told the New Straits Times.
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He said the ongoing pandemic had affected some of Proton’s vendors operations in the Klang Valley.
After the SST exemption announced earlier, the demand had risen but Proton’s vendors were unable to meet the demand due to the movement restrictions order in the Klang Valley, he added.
He said Proton had previously aimed to increase production by 30-40 per cent to 11,000 units per month to meet the demand.
Maybank Investment Bank Bhd analyst TJ Liaw said without the SST exemption, production would be delayed and buyers might be angry as they had booked their cars before the year ended.
With the SST exemption, he said car sales might reach an average of 50,000-plus units per month compared to 40,000-45,000 unit a month sans the exemption.
“This move will spur the automotive industry. At least 2021 will be better for the sector,” Liam added.
Public Investmen Bank Bhd (PublicInvest) said the exemption would provide car buyers some financial relief as car prices was likely to continue to be cheaper between three per cent and five per cent, depending on the models.
PublicInvest expects the total industry volume (TIV) to increase by six per cent to 500,000 units next year, supported by new and facelifted models, coupled with low financing rates.
The Malaysian Automotive Association has forecast a TIV of 550,000 units in 2021.
-NST