New vehicle sales remain high for first month of 2019

During the final two months of 2018, there was a surge in sales, with an average of around 48,000 units each month, and this level continued into the first month of 2019 as 48,450 vehicles were registered. Some of the 9% increase over December’s Total Industry Volume (TIV) could be attributed to customers preferring to have their vehicles registered in the new year, but the pre-Chinese New Year promotions would also have persuaded others to consider a new vehicle to celebrate.

Source: Monthly reports of Malaysian Automotive Association (MAA)

The TIV for January 2019 was about 1.09% higher than that reported for January 2018 (44,560). While this may suggest an improving market, a senior executive in one of the car companies suggested that the numbers can’t be relied on to determine trends for the time being. Due to a large number of vehicles that have been booked but not delivered still being held at plants around the country, the release of these vehicles for registration at any time can show an increase that does not reflect real demand.

The reason for the large number of vehicles not being delivered is that the companies are still unable to get confirmation of the incentives (from the government) which they applied for. These incentives can significantly influence the retail prices as they offset the costs. This matter was highlighted by the Malaysian Automotive Association (MAA) last year and it was revealed that some members were waiting for responses to their applications in May. According to a government statement, there is a need to review applications more closely, hence the delay, although they must also understand that customers have already paid their deposits months ago for vehicles which they still have not received. Many may blame the company for the delay as they are unlikely to understand the real reason.

Looking ahead, the MAA expects February sales to be lower, which is normal for February as it is a shorter month. This year, with the Chinese New Year holidays, there are even less working days. But the TIV may still not show a decline if one or two companies are suddenly informed that their incentive applications are approved and they quickly deliver thousands of vehicles in the month.

While different countries have difference policies and regulations that make it challenging for car companies to do business, Malaysia seems to have added complexities which are unnecessary and only serve to be disruptive to the car business. Perhaps it is one reason why carmakers don’t want to make bigger investments in their businesses here.

[Chips Yap]