Reduction in prices due to zero rated GST, along with Hari Raya festive season promotional campaigns and offers were the reason behind the past month’s market performance.
KUCHING: The automotive sector’s zero-rated goods and services tax (GST) robust sales has been projected to continue until the new sales and services tax (SST) is implemented.
In the latest press release on production and sales for June 2018, the Malaysian Automotive Association (MAA) revealed that total industry sales volume (TIV) during the month was at 64,502 units, 50 per cent or 21,519 units higher than May 2018.
MAA said that reduction in prices due to zero rated GST, along with Hari Raya festive season promotional campaigns and offers were the reason behind the past month’s market performance.
“Sales volume in June 2018 was 28 per cent or 14,229 units higher than the similar corresponding month in 2017,” the association added.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), sales volume for July 2018 and August 2018 are expected to be around the June 2018 level as consumers race to purchase the zero-rated GST vehicles — at an average of circa six per cent reduction in vehicles prices — before the new SST is gazetted, tentatively, on September 1, 2018.
Kenanga Research further noted that the new SST may increase car prices across the marques depending on the new tax mechanism — tentatively, provision of services at six per cent and sales of goods at 10 per cent.
“If the new mechanism is the same as the previous SST regime, we believe that there will be at an average of circa eight per cent increase in vehicles prices across the marques from the current zero-rated tax,” the research arm said.
Meanwhile, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) expected monthly TIV to gain further as total industry production (TIP) picks up from a shorter working month in June, due to public holidays.
For June 2018, TIP amounted to 39,365 units, up from 32,179 units in the similar corresponding month in 2017.
“Contrary to our earlier monthly sales expectations of 60,000-unit average for the GST-free period, June TIV was already a beat with potentially further growth ahead from a longer working month in July and August,” it said.
As such, Maybank IB Research kept its 2018 TIV forecasts unchanged for now as the research arm expected a sharp sales decline from September 2018 taking into account the replacement of GST with SST which is expected to raise car prices by seven to nine per cent from current levels (GST-free).
For Affin Hwang Investment Bank Bhd (AffinHwang Capital), the research firm’s 2018 TIV forecast also remained unchanged at 582,400 units as it believed the sector’s outlook remains bright.
This was due to a temporary boost from the cheaper zero-rated GST car prices, strong pick-up in consumer spending, aggressive model launches and sustained strength of the ringgit.