Industry experts predict challenges for the internal combustion engine (ICE) driven second hand car market due to the growing focus on environmental, social, and governance (ESG) standards. This could lead to higher costs and taxes for ICE vehicles, raising doubts about the sustainability of the second hand car industry.
The delay in adopting ESG principles is a concern, notably seen in the environmentally harmful reputation of the used car market. This is due to reliance on old, polluting vehicles using fossil fuels.
According to NST, in Malaysia, the secondhand car market was worth $25.14 billion (RM111.57 billion) in 2021.
Financial institutions closely review ESG disclosures of affected companies. Those aligning with ESG get better rates, while non-compliant ones face higher rates, affecting profits. This challenge could impact used car sellers with write-offs, inventory expenses, and higher financing costs.
Some companies like UMW Holdings Bhd have embraced ESG initiatives, committing to carbon neutrality by 2050. Interest in ICE vehicles could decrease due to potential electric vehicle (EV) tax reductions and subsidies, accelerating their decline.
Sellers might cut ICE vehicle prices to sell inventory, benefiting buyers. However, selling ICE vehicles to dealers might fetch lower valuations as EVs gain prominence.
With a rising focus on ESG-aligned products, the used car sector might face stricter regulations, impacting finances if its image isn’t improved. The used car industry faces an ESG challenge due to its focus on reselling vehicles.
