PETALING JAYA: Total vehicle sales are expected to start picking up from this month, as the government’s economic relaxation measures have allowed automotive players to resume operations.

       RHB Investment Bank in a report said the outlook for the remainder of the year is looking positive for the sector.

       “With easing lockdown measures and key states moving into National Recovery Plan phase two, we expect to see a bump in September’s total industry volume (TIV).

       “Test drives of vehicles are now allowed for states under phase two as per the latest standard operating procedures.”

       The research house said automakers are already ramping up production to cater for order backlogs.

       “However, we continue to expect supply chain issues to plague recovery in the second half of 2021, especially for volume models, which could directly impact sales volumes.

       StarCarSifu

       “Conversations with automakers suggest their supply chains are likely to be intact, at least for the next one-to-two months.”

       At the moment, more than half of the TIV is dominated by national car manufacturers, Proton and Perodua. In terms of potential risks to the industry’s outlook,

       RHB said this may include the potential tightening of bank approvals for car financing; sharp weakening of the ringgit; slower-than-expected normalisation in demand post the ongoing tax holiday; and sustained disruptions in semiconductor chip supplies.

       The research house said further Covid-19 spikes and subsequent rolling lockdowns could also potentially hamper the outlook for the local automotive industry.

       The Covid-19 pandemic saw a surge in demand for personal electronic items such as cell phones and laptops, which eventually led to a shortage of chips worldwide, as production could not keep up with demand.

       Some cars need more than 3,000 chips per vehicle.

       Even if one of the chips is unavailable, the production of that vehicle cannot be completed.

       Meanwhile, the vehicle sales tax exemption was announced in June last year under the short-term economic recovery plan or Penjana.

       Under the exemption, locally-assembled cars are fully exempted from the sales tax, while for imported cars, the sales tax has been reduced from 10% to 5%.

       The tax holiday was initially supposed to last until the end of last year. However, it was extended to June 30, 2021; and then again until the end of the year.

       According to the latest Malaysian Automotive Association (MAA) statistics, TIV plunged to 17,500 units last month, compared with 53,838 units in the previous corresponding period, as operations were disrupted by the nationwide lockdown.

       Year-to-date August, total vehicle sales stood at 273,757 units, compared with 286,261 units in the previous corresponding period.

       In a statement on Tuesday, the MAA said showrooms in many states including Selangor and Kuala Lumpur were only allowed to operate from Aug 13.

       It is expecting sales to recover further this month as the lockdowns are eased.

       “September sales will be higher than the August level as businesses for most industries, including the automotive sector had resumed albeit at certain levels.”

       There are also continuous efforts by car companies to boost sales to generate revenue, it noted.