Malaysia's vehicle sales pass 600,000 mark

In 2005, the Total Industry Volume (TIV) for the Malaysian market crossed the 500,000 level and last year, the 600,000 level was passed. With a TIV of 605,156 units in 2010, it’s a new record that replaces the last one which was 552,361 units. The record TIV was achieved with a strong sales volume (54,765 units) in the last month of 2010 which was 22% higher than in November.

Announcing the numbers for 2010, Datuk Aishah Ahmad, President of the Malaysian Automotive Association (MAA) which compiles industry data, said that the TIV surpassed expectations. There has been uncertainty in 2009 which led to a conservative forecast of 550,000 units for 2010; however, as the sales momentum picked up during the first half of the year, the MAA revised its number upwards to 570,000 units. This too proved to be low and by the final quarter, the bets were on how close to 600,000 the final TIV would be.
 

The figure of 605,156 units registered represented an increase of 12.7% over 2009’s 536,905 units. In the passenger vehicle segment, the increase was 11.8% to 543,594 units but commercial vehicles (which include pick-ups) saw a more significant 21.8% growth to 61,562 units.

Among vehicle types, MPVs saw the biggest growth of 68.9% over 2009, going from 63,757 units to 107,714 units. This was due to the introduction of MPVs by both the top carmakers – the Alza by Perodua and the Exora by Proton – and also because such vehicles are more suited for Malaysian families which are often large. The models were also much more affordably priced than other MPVs as both companies enjoy numerous incentives from the government which enable them to price their models much lower.

SUVs saw an increase of 47.2% to 15,416 units and this was largely in the compact segment with models like the Nissan X-Trail, Honda CR-V and Toyota Rush. In order to attract buyers, a number of companies also began offering 2WD variants of SUVs which were priced lower.
 

Pick-ups also registered notable growth of 29.5% to 40,414 units. Up till 1998, such vehicles could not be registered for private use but when the regulations changed, their popularity rocketed. This was partly because they were cheap due to not being subjected to import duties and the designs were also less utilitarian with interiors becoming comparable to passenger car cabins.

The MAA’s data, however, shows pick-ups classified in the commercial vehicle category and while many are bought for business purposes (especially in East Malaysia), many are also bought for personal use. According to Edaran Tan Chong Motor’s Dato’ Dr. Ang Bon Beng, about 70% are registered for private use (based on ETCM’s sale of Nissan models such as the Frontier and Navara).

Datuk Aishah said the factors which led to the good year for the industry include strong economic growth, the many new and bold plans introduced by the government which boosted consumer and business confidence, pent-up demand from the year before, more disposable income, the many new models launched during the year and aggressive sales campaigns. She noted that incentives for buyers were innovative and attractive with low interest rates for loans, longer repayment periods, extended warranties, free maintenance and free gifts.

As for the output from plants in Malaysia, there was an increase of 16% to 567,715 units. This is behind the plants of Indonesia and Thailand which, in the 11 months of 2010, had collectively produced a total of 640,839 and 1,507,013 units, respectively. Unlike plants in Malaysia which produce only for the domestic market, the plants in Indonesia and Thailand are huge facilities established by global carmakers like Toyota, Honda and Mitsubishi which are regional and global production hubs for certain models. The Toyota and Mitsubishi plants in Thailand, for instance, make pick-up models for export globally while Honda’s factory in Indonesia exports the Freed MPV to ASEAN markets.

Looking ahead, the MAA expects continued growth in the TIV for 2011 though it won’t be as spectacular as the previous year. While the economy still looks good, there is uncertainty about economic growth globally and this can have some effect on consumer sentiment. There will, of course, be new models to keep buyers interested and a generally stable environment in the country will contribute to sales growth that is forecast at 2.1% or 618,000 units. Of these, 555,000 units (89%) are expected to be passenger vehicles.

Modest growth is also forecast for the coming years to 2015 when the TIV is expected to reach close to 650,000 units. Datuk Aishah said that the modest increases of less than 2% annually are because it is felt that the market is already pretty saturated with an average of 1 car per 4 Malaysians. Another factor is that the extra long H-P terms (5 years to 10 years) were offered from around 2005 and this means that there are going to be a large number of motorists who will still be paying instalments for their vehicles in coming years. These people may not be inclined to change their vehicles, which will have an effect on sales.

It was never really ‘healthy’ to offer such long terms of repayment because the amount of interest payable is substantial. For a 10-year repayment term at 3% interest per annum, the interest alone amounts to 30% of the loan to be repaid. With depreciation occurring every year, there will be a big gap between the vehicle's residual value and how much is owed, making it difficult to trade-in for new vehicles.

As for the trend in prices, Datuk Aishah said that consumers should not expect prices to fall because there are no reasons for this happening. The notion that ‘AFTA will be ‘activated’ again’ is a misconception because the provisions for the ASEAN Free Trade Area agreement have been fully met by the Malaysian government since last year when import duties were dropped to 0% for AFTA-compliant models, ie those made within ASEAN and having a minimum of 40% ASEAN-sourced content.

“There is nothing more to reduce,” she said, explaining that while AFTA may not have brought new vehicle prices down, it has in some ways moderated increases. Nevertheless, she acknowledged that Malaysian vehicle prices are still high when compared to neighbouring countries and this is largely to do with the high excise duties (65% and above). She explained that for a vehicle that costs RM100,000, some 55% of the money a buyer pays goes to the government. So if prices are to come down, the government will have to reduce excise duties – something which she does not expect to happen since the government needs as much revenue as it can get. “Among all sectors, the excise duty that the auto industry pays is the second highest of the total revenue collection,” she revealed.

When asked if the MAA would lobby to have excise duties lowered, she quipped: “That’s what we’ve been doing for the past 20 years!”

The MAA President also noted that while the National Automotive Policy (NAP) has provided some direction for the industry to plan with, there remains hesitation on the part of some of the major carmakers to make bigger investments here. Apart from lack of clarity and the continued view that the ‘playing field’ is still not totally level for everyone to compete in, she said that the government still does not give enough assurance of consistency and continuity in policies announced.

For example, the waiver on all import and excise duties for hybrid models is only for 2011 and no one knows whether this will continue or be revised. As such, companies like Volkswagen are reluctant to commit themselves to selling hybrid models as they are unsure of long-term prospects. It’s different in Thailand where the government has announced clear policies that have given Toyota confidence to make some of its hybrid models there.

Click here for Frost & Sullivan's forecast for 2011

Related articles: 
Toyota remains No. 1 in non-national segment  |  217% increase in sales for VW

Perodua claims No.1 position again   |   Honda sales rose by 15% in 2010

Other 2010 Market Reports

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