Despite the fact that the fulfilment period associated with the sales tax exemption has expired on March 31, car sales are expected to remain strong in the second quarter of 2023. Automotive businesses are optimistic about their performance in the current quarter, thanks to healthy sales orders and active marketing activities.
According to the Malaysian Automotive Association (MAA), total vehicle sales in March 2023 reached a new monthly all-time high of 78,849 units, breaking the previous monthly record of 76,657 units set in December 2022.
The month’s total industry volume (TIV) was supported by the fulfilment of bookings made during the sales exemption period, a rush for delivery by enterprises with fiscal years ending on March 31, 2023, and Hari Raya festive season promotional activities.
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.
While 2021 was a difficult year for the car companies, 2022 has seen significant increase in volumes in spite of the ongoing supply shortage of certain parts, limiting output from the plants. According to the Malaysian Automotive Association, which has been compiling industry data since 1967, the Total Industry Volume (TIV) in the first six months of 2022 was 331,386 units, an increase of 82,208 units or 33%.
This big increase is attributed to the pent-up demand for new vehicles but it has also to be noted that the TIV for the same period in 2021 was low due to the restrictions of the Movement Control Order (FMCO) in June 2021. As can be seen in the chart, the strict restrictions saw a sharp drop in sales.
Total Industry Volumes – 2022 vs 2021. All charts provided by Malaysian Automotive Association.
Following the government’s decision of not extending sales tax exemption incentive for passenger vehicles (under the PEMERKASA+ package) after June 30, 2022, bookings surged as those who wanted to beat the deadline rushed to place bookings for new vehicles. Although they would not get their vehicles before the deadline, the government has allowed the exemption to be allowed provided the new vehicles are registered by March 31, 2023.
TIV (Total Industry Volume) of new vehicles by month.
This pushed the June TIV to 63,366 units, an exceptionally high volume as companies rushed whatever stocks they had to customers. The figure could have been higher, had there not bee the shortage of vehicles due to the shortages of chips and components which affected certain makes.
The top 5 brands
The top 5 brands retained their 2021 ranks, with Perodua still leading. While volumes rose, the markets shares of Perodua and Proton decreased, but the market shares of the non-national makes rose.
Higher output from factories
Total production volume in the first half of 2022 also increased likewise by 31.8% to reach a total of 317,933 units compared to 241,288 units in the same period last year. The much higher total production volume seen this year was because there was a total lockdown enforced by the government in June 2021 which shut down factory operations. In addition, the higher output was also in response to the high demand.
Production volumes for first half of 2022 and 2021.
Forecast revised upwards
For the whole of 2022, the MAA has raised its forecast to 630,000 units in view of the strong and positive market trend. This is 30,000 units more than the original forecast announced at the beginning of the year. This means that during the second half of the year, monthly saves will have to be at least 49,760 units.
Revised forecast for 2022. *: Original forecast was announced in January 2022.
In revising its forecast, the MAA has taken various economic and environmental factors into account as well as drawn on input from its members. The association expects the country’s economic recovery to maintain its momentum and the Finance Ministry is maintaining its official GDP forecast of 5.3% to 6.3% for 2022.
However, there are still some factors that can slow the economic growth, such as geopolitical tensions, escalating oil prices, inflationary concerns, and increases in food prices. These may also make consumers hesitate in making purchases, while business in the auto industry may faced increased logistics and shipping costs and experience supply chain disruptions. Bank Negara Malaysia’s recent decision to increase the Overnight Policy Rate (OPR) by 25 basis points to 2.25% may also dampen consumer confidence.
Looking ahead till 2026…. assuming that there are no major disruptions in Malaysia or globally.
Sales figures in other ASEAN markets from January to May 2022. The data for electric vehicles is based on officially reported numbers by members of the respective automotive associations in each country.
With steady progress towards resolving issues delaying production of new vehicles, Proton recorded its best sales month of 2022 with 14,787 units (domestic + export) registered in June. This volume represented a 51.0% growth over the previous month, taking total sales for the first half the year past 60,000 units. The 60,124 units delivered were an increase of 3.9% over the same period in 2021.
Overall, Proton retains its second position in new vehicle sales in Malaysia and estimates its market share to be 22.6%. The cumulative market share for the year is 18.2%, a decrease of 5.1% compared to the first 6 months of last year. This is based on an expected Total Industry Volume (TIV) of 331,164 units (the Malaysian Automotive Association will announce confirmed data later in the month).
Proton X50 achieves best sales month
Launched in October 2020, the X50 SUV has been remained a strong seller for Proton. It has helped catapult the brand to the position of best-selling SUV brand in the country. June saw the X50 recording its best sales month with 4,473 units delivered nationwide. This volume was clearly ahead of other B-segment SUVs as well as in the overall SUV market.
The X50’s bigger brother, the X70, also saw strong sales, especially with the updated model. It achieved its best performance in 20 months with 2,696 units. This volume, according to Proton, puts it at the top of the C-segment SUV list.
Another model enjoying the benefits of a recent refresh is the Saga, with the 2022 model introduced on May 12. In June, 5,460 units were delivered, which Proton says puts it back to the top of the A-segment sedan class. During the first 6 months of 2022, the model’s cumulative total has reached 23,484 units.
The evergreen Exora MPV has kept its leadership in the C-segment MPV class and in June, the company delivered 513 units. As for the Persona and Iriz, these two trusty models recorded deliveries of 1,224 units and 421 units, respectively.
Over 150,000 bookings in 6 months
“June was a busy month for the automotive industry with most brands trying to produce as many cars as possible to satisfy market demand. The announcement that sales tax exemption would be removed from July 1 also created a surge in bookings as customers rushed to take advantage of the savings offered. Proton has received more than 150,000 bookings for the first 6 months of the year and when added to carry-over orders from 2021, we will need to work hard to deliver cars as quickly as possible to eager customers,” said Roslan Abdullah, Deputy CEO of Proton.
“Thankfully, the gradual resolution to our parts shortage issues has not only boosted production but also had a positive effect on the aftersales network. As promised, all our 3S/4S outlets now have 3 months stock of fast-moving parts and this is replicated at our parts warehouse. Supply issues for other parts are also being resolved so we are hopeful of delivering a higher level of aftersales service to our customers soon,” he added.
Top exporter
Proton was the first company to export vehicles from Malaysia and today, it is also the top vehicle exporter. While its domestic sales continue to grow, the growth in export sales has also been significant. For the first half of 2022, the total number of vehicles exported was 2,722 units, an increase of 81.2% over the previous year.
The Saga has accounted for 59% of the total volume exported but the X70 and X50 are also growing in demand at a faster pace. As in the domestic market, June also saw both model posting their best-ever export numbers and Proton expects even better numbers in coming months.
Pakistan continues to be the biggest export market, taking 1,770 units for the first half of 2022, a growth of 183% compared to the first half of 2021. This was followed by Brunei and Bangladesh with 203 and 194 units, respectively. Local assembly in some countries is helping Proton’s distributors to price the models competitively in their markets.
“Proton’s exports are one of the pillars to drive our future growth and also in line with our promise to the government to help develop Malaysia’s automotive export industry. With the addition of new markets such as South Africa to our portfolio, we target for export volumes to continue on their current growth trajectory and form an even larger portion of our sales in the future,” Encik Roslan Abdullah said.
While March saw a big surge in new vehicle sales to take the Total Industry Volume (TIV) past the 70,000-unit level, April’s TIV fell by 23% to 56,213 units of passenger and commercial vehicles.
The decline was attributed by the Malaysian Automotive Association (MAA) to the following reasons – 1) the ongoing global shortage of microchips as well as certain components and logistics delays, and 2) companies with their financial year ending in March put in maximum effort to close with the highest volume.
While the TIV for April 2021 was 4% higher, the cumulative volume after the first 4 months of this year is 8% higher, with 215,965 vehicles sold. This is made up of 140,905 units of passenger vehicles (excluding pick-up trucks) and 25,560 of commercial vehicles (including pick-up trucks).
Local production has, likewise, also been higher in the first 4 months of 2022, compared to the same period in 2021. The combined output from all the assembly plants was 208.894 units, 10,418 units more than in 2021.
The output in April was also higher this year, with 54,734 units produced, compared to 51,390 units in the same month last year.
Although May is a short working month due to the long holidays during the Hari Raya Aidilfitri period, the MAA expects that the TIV can be as high as April’s. Many companies still have a backlog of orders to fulfill and even if the market takes a ‘breather’, the numbers can still be high. Nevertheless, how many units that can actually deliver will depend on how many vehicles can be completed given the shortage of microchips.
Demand is high but Proton, like most other carmakers, cannot complete its new vehicles at the factory because crucial components are in short supply. These are the microchips which are in the many electronic systems that modern cars have; just one item not available and the vehicle cannot be completed. This situation has been ongoing since last year and has limited the number of vehicles Proton can deliver, resulting in customers having to wait longer.
The chart below shows the effects of the shortage as each month this year has seen less deliveries than the same month in 2021. By right, the numbers should be accelerating as there is strong demand but Proton can only report what it delivers, not what is in its order bank.
The carmaker reported 8,829 units (including exports) for the month of April, a decrease of 32.2% compared to the month before and 41.1% less than what was reported in April 2021. This volume is estimated to be a 15.6% share of the Total Industry Volume (TIV) in April and cumulatively for the first four months of 2022, the market share should be around 17%.
Long waiting list
Commenting on the situation, Roslan Abdullah, CEO of Proton Edar, said: “After two years of pandemic-affected sales, Malaysia’s automotive market continues to show strong growth potential in 2022, as evidenced by the long waiting list for new car deliveries. Proton is also trying to catch up to market demand, but we also must acknowledge being the most affected by chip supply issues.”
“Thankfully for our customers, we have secured our supply of chips for May and June and are projecting a quick turnaround in the coming months. The situation is still uncertain for the rest of the year and the global car industry is under pressure from rising costs, but the company is working on countermeasures against these issues to ensure our customers get the best products and value in Malaysia and abroad,” he explained.
Saga remains bestseller
The Saga continued to be the bestselling Proton in April and no doubt will get a boost in demand when the updated model is launched later this month. The two SUVs – the X50 and X70 – also remain very popular with 1,554 units and 1,530 units delivered, respectively. The evergreen Exora is still tops in the MPV C-segment with its unbeatable value-for-money.
The supply situation also affects exports and in April, 456 units were sent overseas. These brought the total export volume for 2022 to 1,573 units, which is 109.7% higher than for the same period in 2021. At present, Pakistan is the biggest export market for Proton, having taken 1.050 units, followed by Egypt (172 units) and Brunei (138 units).
Data source: Monthly sales reports compiled by Malaysian Automotive Association.
With output from the plants increasing, deliveries in March rose by 62.5% from February to pass the 70,000-unit mark which is one of the highest (if not the highest) in the industry’s history.
Apart from having more stocks, some of the companies with financial years ending on March 31 also put in their final effort to close with the highest possible numbers. Additionally, March also had many business days to sell cars although for many customers, there would still be a lengthy wait, especially for the more popular models.
With the Finance Minister having indicated that the exemption for sales tax won’t be extended again, there is also a rush by customers to get their new vehicles and save money. Again, due to the large number of orders and backlog, some companies are already warning customers that they might not be able to enjoy that saving as their vehicle might not be available before the end of June when the exemption period ends.
Compared to the same month the year before, the Total Industry Volume (TIV) for March 2022 was also notably higher by 13%.
The global shortage of microchips continues to affect carmakers locally as well as in other countries. Members of the Malaysian Automotive Association (MAA) expect that output will still be disrupted and imported vehicles may not be coming in large numbers.
This is likely to cause April’s TIV to fall in spite of festive promotions for the coming Hari Raya Aidilfitri. The big push in March may also diminish orders although many companies still have a backlog of orders to fulfill.
In spite of the challenging conditions during the first quarter of 2022, some of which were carried over from the floods of December 2021, Perodua was able to steadily build up its volume again over the three months.
The Malaysian carmaker reports that it ended the quarter with 61,624 vehicles delivered to customers nationwide. This was an increase of 6.4% compared to the same period in 2021.
On a month-on-month comparison, 26,759 vehicles were delivered in March 2022, a 9.5% increase from the 24,433 units reported in March 2021. Its February sales volume was 17,421 units, almost the same as in January, with the two months being unusually low as the carmaker’s production was affected by parts supply issues.
Production data for March 2022 not available at time of publishing.
According to Perodua’s President & CEO, Dato’ Zainal Abidin Ahmad, the impact of COVID-19 and component supply issues are still present. However, the company has been able to work with its suppliers and dealers to lessen their impact.
“Our focus is now to expedite the vehicles delivery to our customers before the sales tax exemption deadline ends on June 30, 2022. That being said, Perodua also echoes the Malaysian Automotive Association’s request to further extend the sales tax exemption as factors such as the global semiconductor supply disruption and COVID-19 cases are still impacting the industry,” he added.
Dato’ Zainal said that the automotive industry, including its local ecosystem, thanks the government for the initiative (in the form of the sales tax exemption) as it was able to keep demand high and sustain the industry throughout the worst of the pandemic.
“Right now, the local automotive ecosystem is starting to recover and an extension in the sales tax exemption is what the industry needs for sustained growth during this recovery period,” he said.
New transmissions at a supplier’s factory in Negeri Sembilan ready for delivery to Perodua’s factory.
“Moving forward, we foresee the second quarter of 2022 to be the highlight for the automotive industry as brands will deliver as many vehicles as they can within that 3-month period. While semiconductor chip supply and COVID-19 would still influence production, we expect that production and registration will continue to improve,” said Dato’ Zainal
He added that the company does not foresee other factors such as the conflict between Russia and Ukraine to have a major impact on the company’s production moving forward. Based on these factors, Perodua is maintaining its 247,000 sales target for 2022.
Data for BMW and MINI is only provided by BMW Group Malaysia every three months. Data for Kia, Peugeot and Volkswagen not available at this time. Data for Mercedes-Benz is not available as Mercedes-Benz Malaysia does not wish to reveal their sales data. Source: Malaysian Automotive Association.
Source: Monthly reports of Malaysian Automotive Association.
Historically, February is a ‘low’ month as it has the least working days of the year and often, there are also major festive periods during the month, further reducing the number of selling days. However, February in 2022 bucks the trend and saw an 8% increase over January sales to close at 43,722 units. Compared to 2021, the Total Industry Volume (TIV) was quite close, with a difference of 274 units.
The surge in sales (or more correctly deliveries) was due to the big backlog of orders being fulfilled as much as possible. The severe floods in December had caused shortages in the supply chain as some parts suppliers had to suspend operations due to their factories being flooded. This resulted in the TIV for January being lower than it should have been and as supplies resumed, the plants quickly rushed to complete vehicles, and send them to dealers.
The resumption of regular production was reflected in the high output of vehicles from plant in February – 51,291 units, which was 13% more than for the same month in 2021. 92% of the output was passenger vehicles. There are still constraints to production due to the global shortage of microchips and the backlog continues as it is beyond control of assemblers and suppliers.
The upward trend is expected to continue through March which has more working days. The companies still have many outstanding orders to fulfill, while new models are being launched every month. March is also the final month of the financial year for some companies, so they will be pushing hard to finish off with their best possible numbers.
As for cumulative TIV, this year looks like it will be a better year if the performance – in spite of shortages – is any indicator. Within just the first two months, the TIV for sales is 10% higher than the same period in 2021, while the TIV for production is 11% higher. Sales of commercial vehicles (including pick-up trucks) is 33% higher, suggesting that companies are confident enough to expand or update their fleets in anticipation of improving business.
