Reintroduction of SST likely to lift car prices

KUCHING: While the reintroduction of the Sales and Service Tax (SST) has been projected by Affin Hwang Investment Bank Bhd (AffinHwang Capital) to likely lift car prices marginally, it believes the impact will only be minimal.

AffinHwang Capital’s market research with various auto companies suggested that the reduction of the six per cent goods and services tax (GST), and the possible return of SST will see car prices becoming slightly more expensive.

According to the research firm, car prices could increase by one to three per cent, depending on models.

“This should reverse the lowered sticker prices since the implementation of the GST,” it said. “Nonetheless, we believe the impact is minimal with the stronger middle-class segment being able to afford big-ticket purchases.”

The research firm anticipated a divergent auto market in 2018, with strong auto players remaining strong while weak players continue to struggle.

With the absence of new model launches from Proton, the research firm expected Perodua to continue to dominate the local mass market.

“We believe the strong support for Perodua Myvi as well as healthy demand for its other models will set the tone for this year’s total industry volume (TIV) growth.”

The research firm noted that selective brands such as Mazda and Volvo were likely to outperform the market thanks to key model launches such as Mazda CX-5 and Volvo XC60.

“The lack of volume-generative models from Proton and competitive pressure from foreign makes will likely see the nationals’ market share lag foreign car brands’ market share in 2018.

“Meanwhile, Proton and Nissan are likely to continue to post weak sales volume over 2018-19E due to the absence of major new model launches.

“Overall, the new-launch pipelines in 2018 remain healthy and we count 29 new model launches and facelift vehicle variants in the first quarter of 2018 (1Q18).”

On another note, AffinHwang Capital highlighted that the buying interest in SUVs is gaining momentum and the automakers continue to launch more SUV models.

Entering 2018, the research firm believed Toyota’s C-HR and Volvo’s XC60 entry will catch on the late SUV wave, mirroring the success of Honda’s HR-V in 2015.

“As the millennials enter into their family-formation stage, we believe there is room for carmakers to add more SUV variants at the lower end of the market – a space where Proton’s upcoming Boyue and Perodua’s new SUV is eager to capture.”

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