PETALING JAYA: Expectations of the automotive sector’s total industry volume (TIV) growing 18% year-on-year to 600,000 units in 2022 are still high, with research analysts optimistic about the reopening of economic activities and new passenger car models.

       According to Kenanga Research, a recovery in car sales is evident from the growing number of backlogged bookings for popular models of up to six months and the stream of new models launches in 2022.

       This is further driven by the 100% sales and service tax (SST) exemption on locally assembled passenger vehicles and 50% exemption on imported cars until end-June.

       “Also, new launches of battery electric vehicles are expected to be boosted by the exemption from import and excise duties, sales tax, road tax, and individual tax relief to support development of the local EV industry.

       “Nevertheless, for certain models, the recovery of car production could be limited by the ongoing global constraint in semiconductor chips supply.

       “Automakers have prioritised the usage of such resources, diverting any precious semiconductors they have to their most profitable vehicles such as full-sized trucks and sport utility vehicles as well as luxury vehicles,” said the research house.

       Kenanga Research also pointed out that the Malaysian Automotive Association is lobbying for further SST exemption extension to end-2022 as the current chip shortages are limiting automakers’ ability to maximise production capacity to meet backlogged demand.

       Meanwhile, Hong Leong Investment Bank (HLIB) Research expects continued momentum of high sales volume until June on the SST exemption as well as new car models.

       However, despite the expected strong TIV recovery, HLIB Research maintained its “neutral” rating on the sector.

       It expected TIV to drop post the expiry of the SST exemption along with the ongoing global supply chain issues.

       TA Research also noted that the Russia-Ukraine conflict has added further disruptions to automotive supply chains and worsened the existing logistical issue, particularly in the European region. However, the research unit pointed out that the quantum of damages varied among industry players.

       According to Perusahaan Otomobil Kedua Sdn Bhd, the company does not expect the Russia conflict to have a major impact on its operations moving forward.

       “Meanwhile, we believe China’s massive lockdown following the Covid-19 outbreak is also impacting the supply chains of the automotive sector. We understand that some of the car components are produced in the lockdown areas. Thus, it may create further disruptions to global supply chains,” said TA Research.