PETALING JAYA: After a 19% decline in sales on a month-on-month basis in May, total industry volume (TIV) for the auto sector is expected to take an even steeper dive this month as most car showrooms and production centres are closed due to MCO 3.0.

       However, taking a longer-term view, prospects for the industry should improve backed by an accomodative interest rate environment and the extension of the sales and service tax (SST) exemption until the end of this year.

       Still, not all analysts are convinced enough to turn fully positive on the auto sector just yet.

       Kenanga Research has maintained its “neutral” call on it for now.

       “We expect June to record close to zero sales from the closure of all the marques’ showrooms and vehicle production for the Phase 1 lockdown period,” it told clients in a report.

       Nevertheless, it believes that new volume-driven launches can possibly help spur future sales, “along with overflowing back-logged bookings, further boosted by the extension of the SST exemption, and seasonal promotions.”

       It also pointed out that within the MCO 3.0 period which is supposed to end come June 28, some units can still be registered through the JPJ e-Daftar system, referring to vehicle purchases of which loans had already been approved.

       TA Securities is a little more upbeat than Kenanga, maintaining its “overweight” call on the sector.

       It said the effective rollout of the Covid-19 vaccination programme would bode well for car sales.

       “This will be enhanced by other positive drivers such as economic recovery, an accommodative interest rate environment and the launches of new models,” it said in a report.

       Its TIV forecast for 2021 is at 627,000 units while Kenanga’s forecast is at 545,000 units.

       Notably, the TIV in May declined 19% to 46,663 units. On a year-on-year basis however, it was up 100%.

       In its report, TA said on the whole, it expects the automotive sector to perform better in 2021, thanks to tax incentives.

       Kenanga said its TIV forecast figures will be driven by the extension of the SST exemption, despite a hiccup in sales from the closure of showrooms and vehicle production halts.

       This, however, would be offset by the supply of newer models that garner better margins, it added.

       On Monday, Malaysian Automotive Association president Datuk Aishah Ahmad told StarBiz that the combination of rising raw material prices and the chip shortage, which is having an impact on global car prices, could affect the Malaysian automotive industry if the situation worsens.

       “Depending on the percentage increase in rising material costs, if local automotive original equipment manufacturers cannot absorb the costs, they may have to pass them to potential buyers, ” she said.