March was the final month for delivery of new vehicles that were exempted from sales tax, the provision having been allowed by the Finance Ministry after the tax exemption ended on June 30, 2022. Understanding that the demand had been very great as many people wanted to save on the sales tax, and production was not sufficient to fulfill the orders by the deadline, the ministry allowed the car companies until March 31, 2023 to deliver the vehicles booked before the deadline.
The 9-month allowance was certainly appreciated as the industry had production disruptions due to shortages of parts, especially microprocessors. During the second half of last year, vehicle output was inconsistent even though efforts were being made to maximise the numbers, with priority being given to the tax-exempted orders.
Furthermore, March is also the end of the financial year for some car companies and there is usually a final strong push to end the financial year with the best numbers. Thus the March Total Industry Volume (TIV) of new vehicles shot up by 24% to reach 78,849 passenger and commercial vehicles.
Second time over 70,000 units
This was a new record for the industry, beating the 76,657 units reported in December 2022. Other than these two months, the monthly TIV has never gone past the 70,000-unit level since the Malaysian Automoative Association began keeping records in the 1960s.
While the TIV for March 2023 was just 8% higher than for March 2022, the cumulative TIV for the first quarter of the year (Q1) was 20% higher than the same period in 2022. Due to the constant pressure to deliver as many vehicles as possible, the numbers in January and February were higher than the same months last year.
Production, likewise, saw a big jump with 29% more vehicles being completed by the assembly plants during Q1 2023 compared to Q1 in 2022. Stockyards were usually empty for many months as new vehicles were loaded on carriers and sent off as soon as possible.
Now that the pressure of delivering new vehicles has eased off, the industry is waiting to see the true market situation and adjust accordingly. April is a short month with the Hari Raya festive period, so the orders taken are not indicative of what lies ahead.
However, there is a sense of caution as many industry executives feel that, at best, the annual volume will equal what was achieved in 2022. These past two years have been unusual years, with the rare incentive of sales tax exemption and also recovery of the market after the pandemic.
Historically, a big surge cannot be sustained and the years that follow may see a lower TIV for a while. The full duty-exemption on electric vehicles may be helpful only in a small way as not everyone will want to go electric, and the prices of the models are not in the mass market range.