*2017 figures are estimates pending release of full year’s data by the Malaysian Automotive Association. Chart provided by Frost & Sullivan.

While there is uncertainty among auto industry executives as to the state of the market and whether it will grow in 2018, Frost & Sullivan offers its forecast that Malaysia’s vehicle sales will increase by 2% this year. It assumes that the Total Industry Volume (TIV) of new vehicles registered in 2017 will be just under 590,000 units, so this would mean a TIV of 601,000 units in 2018.

The Malaysian Automotive Association (MAA), which has been compiling industry data since the 1960s, has not released the full year’s data for 2017 yet.

Factors which will contribute to more vehicles being sold are an anticipated rise in wages/disposable income and strengthening of the ringgit which could see imported parts prices dropping along with the prices of imported vehicles. Of course, as in other years, there will also be new models at attractive prices to keep drawing customers to showrooms.

However, there are also factors which prevent the growth from being greater. For instance, Bank Negara Malaysia’s continuous efforts to improve the quality of loans may make it difficult for low-income families, young buyers and SMEs to secure loans to buy new vehicles. “While persistent high household debt will continue to encourage cautious spending, expected wage growth is likely to provide the requisite counterweight,” said Vivek Vaidya, Senior Vice-President of Mobility at Frost & Sullivan.

“Other factors like the National Automotive Policy, improvement in public transport infrastructure as well as growth of ride-sharing will impact the automotive market in Malaysia in the long term but are unlikely to have any significant impact in 2018,” he added.

On the performance of the market in 2017, Mr. Vaidya said that economic recovery and rising consumer confidence resulted in higher demand for passenger vehicles. However, commercial vehicle demand continued to contract for the 4th year in row amidst cautious business sentiment.

“Higher wages resulting from economic recovery led to improved consumer sentiment pushing up sales but were negated by restraints like accompanying inflationary pressures and stringent loan approvals,” he explained.

Elaborating on the decline in commercial vehicle sales, Mr. Vaidya said that the unstable ringgit performance impacted borrowings and operating costs while a higher inflation rate led to cautious spending for commercial vehicles. “However, economic growth and ongoing mega projects like the High-Speed Rail (HSR) and Pan Borneo Highways acted as drivers for the late recovery towards the end of 2017,” he noted.

Toyota continued to lead the commercial vehicles segment with a commanding share of 35%. The Japanese brand regained a large portion of the market share that it lost in 2016, thanks to strong sales of the Hilux which has been the market leader since 2005.

Click here for 2017 monthly market reports.

[Chips Yap]

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