THE fear of getting infected with COVID-19 in public transport has led to an increase in vehicle ownership, be it new or used.
This sentiment is compounded by a recent report that a Mass Rapid Transit (MRT) operator tested positive for the COVID-19.
That said, fear isn’t the only factor that has led to a spike in vehicle purchase. Government initiatives to boost consumer spending such as sales tax exemptions – 100% for completely knocked-down cars and 50% for completely built-up cars – are another contributing factor.
The rise in vehicle sale is evident as the Malaysian Automotive Association has in July this year, increased the total industry volume (TIV) forecast to 470,000 units from 400,000 vehicles.
However, it is still lower than the 607,000 units forecast in January.
“While we take into account that the first half was very slow, the second half of the year will improve because of the Penjana scheme,” MAA president Datuk Aishah Ahmad was reported as saying.
Lower interest rates as a result of Bank Negara Malaysia slashing the overnight policy rate (OPR) could also be cited as factor to spur the spending on vehicles especially cars.
The central bank has thus far cut the overnight policy rate (OPR) four times since the beginning of the year from 2.75% in January to 1.75 in July with the highest being a 0.5 basis points reduction in May.
It is widely anticipated that another round of rate cut may take place on Nov 3.
Hence, Aishah reportedly noted that demand for low-end vehicles was good as a lot of consumers were downsizing their cars from larger to smaller- and medium-sized cars.
Surge in used car sales
While these are for new vehicles, it was reported that used cars dealers also experienced record-high sales in July after the recovery movement control order took effect in June citing tax exemption as the reason.
According to the Federation of Motor and Credit Companies Association of Malaysia (FMCCAM), this is closely related to surge in new car sales, as when buyers purchase a new car they are highly likely to trade in their old car.
However, not everybody is able to spend freely during this trying times as many are faced with retrenchment and salary cuts.
As such, used car is a viable solution for them as they spend cautiously on big ticket items.
FMCCAM president Datuk Tony Khor reportedly said: “Year-on-year (y-o-y), used car sales in July have gone up more than 20%. On a month-on-month basis, sales was up 30% compared with June. Y-o-y June sales jumped more than 100%.”
Although, there is boom in vehicle sales currently, the new total industry volume (TIV) forecast is still 22.2% or 134,287 vehicles lower than 2019’s TIV of 604,287 units, MAA observed.
The current automotive scenario is in total contrast with that of 2018 where many believed the auto players were not out of the woods yet and would be in for a bumpier ride.
This was largely due to Bank Negara Malaysia’s move to raise the OPR rate by 25 basis points to 3.25% and stringent loan requirements.
It was reported back then that the automotive industry might see a lower TIV growth due to limited catalysts such as new models and positive automotive policies. – Oct 25, 2020
