KUALA LUMPUR: Sales of new vehicles are set to be lower this year than in 2020 with car dealers staring at bankruptcy from extended lockdowns, an industry body warns.
The Malaysian Automotive Association (MAA), initially bullish that the total industry volume (TIV) would hit 570,00 units over the 529,434 units in 2020, has sung a different tune.
MAA now said the TIV would drop by 70,000 units from its earlier projection, to 500,000 units. This would be 5.6 per cent lower than 2020.
Its president Datuk Aishah Ahmad said the revised forecast was due to disruptions in sales and production as a reult of the ongoing nationwide lockdown.
Consumers’ sentiment, she noted, would continue to remain weak due to uncertain economic environment, apprehension about pay cuts and layoffs as well as tightening credit conditions.
Additionally, the uncertainty over the path of the pandemic as well as possibility of re-imposition of Covid-19 containment measures, may dampen growth of Malaysia’s economy as well as the demand for new vehicles.
“We are concerned about the current situation as the lockdown has already extended into the second half of this year,” Aishah said in a virtual press conference on the industry’s performance in the first half of 2021 yesterday.
“The forecast revision was made after considering many factors especially an assumption on the government’s directive that automotive plants, distribution centres and sales showrooms would not be allowed to operate during Phase One and Phase Two and will only re-open in Phase Three of the National Recovery Plan (NRP),” she added.
For the January-June period, the TIV surged 43.5 per cent to 249,129 units from 173,545 units registered in the same period last year.
But June saw the volume plunging 95.7 per cent to 1,921 units from 44,755 unit in June 2020.
Aishah said the revised TIV was based on a condition that the automotive players including car dealers, assemblers and manufacturers for car, parts and components were allowed to resume operation by August this year.
“The forecast only applies if we are allowed to operate by August. If not, we have to revise our forecast again,” she added.
Aishah said the ongoing business closure since May did not help automotive players, thus affecting their sale and production activities, which could spill over into the next few months.
“We don’t know when the showrooms will be allowed to open and factories to resume production. This is our worry as most small car dealers are tight in terms of cash flow. If this (closure of sale and production) continues, we have to close shop and force to do retrenchment,” she warned.
Aishah said car dealerships were independent dealers with limited cash flow. Even if there was no sale, they were still required to pay rental and salaries, among others.
“They can’t sell vehicles. The only thing they are allowed to operate is a workshop, even it has staff limitation,” she added.
MAA said many of its members would face bankruptcy if the lockdown was extended.
“We have several appeals sent to the government, highlighting the importance to allow our sales and assembly operations to continue to resume with stricter control. If it is not 100 per cent capacity, may be up to 60 per cent of the ability of the staff to operate in the showrooms and factories,” Aishah said.
She said MAA members had exhausted their reserve/savings to sustain operation with zero-sale amid the second year of various lockdowns.
“Car dealers are tight in inventories as they are unable to get both complete-knock down (CKD) and completely built-up (CBU) vehicles. Dealers can’t get their vehicles from the local factories for the CKD units and some of the CBU vehicles orders – placed four months ago – were stranded at the ports as the clearance is very slow,” she said.
MAA is hopeful that the government would ease the lockdown conditions for the sector to survive.
“The only good news is the Sales and Services Tax exemption is still in place. However, we can’t deliver and that causes the problem.
“We hope the stage one and stage two of the NRP and Movement Control Order will be over soon, so we can resume our operation under stricter standard operating procedures.”
Aishah said the SST exemption should be extended for another six months upon the expiry by year-end if the situation persisted.
On how long car dealers can sustain operation without sales, Aishah said “If this restriction continues for another month, they may have to close shop. Even for those involved in dealerships for motorbikes and car parts and components.”