PETALING JAYA: Positive consumer sentiment on the back of better economic growth is expected to spur car sales in 2021. Vehicle sales growth is also anticipated to remain steady even if the sales tax exemption that ends this month is not extended, say analysts. According to Frost & Sullivan Asia-Pacific mobility consulting analyst Nur Afiqah Mohamad, the sales tax exemption has been successful in dampening the impact of the Covid-19 pandemic on the local automotive sector. “Based on the sales performance observed during the sales tax exemption period in the second half of 2020, we expect automotive sales will see a moderate decline in the first few months of 2021. “This is because consumers who intended to purchase new vehicles would have completed their purchases before the tax exemption expires, thus exhausting the demand for new passenger vehicle in early 2021, ” she told StarBiz in an e-mail.An analyst with a local bank-backed brokerage said he expected total industry volume growth to be flat next year. “At most, we’re expecting low, single-digit growth for 2021, on the assumption that the sales tax exemption does not get extended into next year. “Nevertheless, we expect better consumer sentiment for next year, underpinned by effective roll out and distribution of the vaccine which will spur economic growth and ultimately, car sales.” Even if the sales tax exemption is not extended, the analyst added that vehicle sales would be spurred by new model launches and aggressive promotional campaigns. “This should still be sufficient to create excitement in the market, ” he said. Nur Afiqah, meanwhile, pointed out that the government’s decision to implement the sales tax exemption had proven successful to soften the impact of the Covid-19 pandemic on automotive sector.Last week, the Malaysian Automotive Association (MAA) revealed that total vehicle sales continued its upward trajectory for the sixth consecutive month this year in November, rising 7.4% to 56,489 units from 52,584 units in the previous corresponding period. “Despite slow economic activities across major industries in Malaysia, the passenger vehicle segment has seen solid demand, particularly for completely-knocked-down units, as cautious consumers opt for more affordable vehicles. “The tax exemption is also well-received by marques as an average of five new passenger vehicle models are launched every month between June to December 2020, hence creating a strong base for continuous demand after the sales tax exemption ends.” She added that sales are expected to gradually improve in the second quarter of 2021, driven by the anticipated economic rebound post-Covid-19 vaccine delivery. Last week, the Malaysian Automotive Association (MAA) revealed that total vehicle sales continued its upward trajectory for the sixth consecutive month this year in November, rising 7.4% to 56,489 units from 52,584 units in the previous corresponding period. The pick-up in sales was mainly due to the government’s tax exemptions and aggressive promotional campaigns by automotive companies continued to drive sales. Despite the year-on-year pick-up in sales, November’s TIV was 0.3% lower on a month-on-month basis compared with October. Year-to-date November, TIV is still far off compared with last year, with total sales standing at 454,708 units compared with 549,439 units in the previous corresponding period. On the outlook for December, the MAA said sales volume is expected to be much higher than November’s. The association said the higher sales would be spurred by continuation of the impetus from sales tax exemption incentives for passenger vehicles, as well as the ongoing aggressive promotional campaigns by car companies. Under the Short-Term Economic Recovery Plan (Penjana) announced by Prime Minister Tan Sri Muhyiddin Yassin in June, locally-assembled cars will be fully exempted from sales tax while for imported cars, the sales tax will be cut from 10% to 5%, until Dec 31. In July, the MAA announced that it was revising upwards its vehicle sales target for the year by 17.5% to 470,000 units as the grim economic outlook is likely to be buffered by the various incentives recently announced by the government. Nevertheless, the projection would not only mean that sales this year would be a 22% contraction from 2019’s 604,287 units sold. It would also be the first time in 13 years since TIV failed to surpass the 500,000-unit mark. In April, the MAA revised downwards its 2020 TIV forecast to 400,000 units from the 607,000 units it had projected in January.
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