Sales Tax Exemption on New Passenger Vehicle Softens the Impact of the COVID-19 Pandemic on the Automotive Industry and Promotes Transformational Growth
In 2020, Malaysia’s Total Industry Volume (TIV) dropped 12.4%, compared to 2019, with only 529,434 units being sold. The Passenger Vehicle (PV) segment remained dominant with a 90.8% market share. The sales tax exemption introduced between June and December 2020 spurred the demand for the segment.
Sales of gasoline powertrain grew from 82.6% in 2019 to 84.2% in 2020, driven by the high demand for passenger vehicles in the second half of the year. Passenger cars make up the most popular segment in Malaysia, racking up to 73.5% market share in 2020. Strong demand is driven by the widest variety of models offered in the market at a broader pricing point compared to other segments.
Sport Utility Vehicles (SUVs) witnesses a drastic growth in 2019, as consumers’ preference shifted from Multipurpose Vehicles (MPVs). However, lower average household income due to the COVID-19 pandemic has brought down consumer purchasing power, resulting in a moderate shift from SUV to much more affordable passenger cars.
Pick-ups consistently led the commercial vehicle segment, although the total sales volume decline for the whole segment, affected by poor economic activity, particularly in the construction industry.
In 2020, passenger eHailing and car rental services witnessed a decline in demand, as social distancing and work-from-home policy became the new norm. This trend is expected to continue in 2021. However, the market will gradually improve as economic activities return to normalcy.
On-demand delivery service is expected to continue its upward trend, fueled by the rise of the eCommerce business model. This shared mobility solution will also have a spillover effect on logistics and transportation services, as operators are diversifying their offerings within the same platform.
The use of personal mobility devices, such as scooters and bicycles, will see a sharp dip, as the government is tightening regulations and banning their use on public roads. These devices will only be utilized recreationally and not as a first- or last-mile option. With challenges surrounding the tourism industry, bike-sharing operators may be forced to cease operation.
Going forward, automotive sales are expected to improve in 2021, with 5.8% growth, fueled by an improvement in the economy, as the Covid-19 vaccine is being made available, new models are being launched, and sales tax exemption is being continued in the first half of the year.
Market preference for passenger vehicles is expected to lean even further toward the SUV subsegment, as exciting new models are being launched in 2021, including Perodua D55L, Nissan Kicks, and Mitsubishi Pajero. In the commercial vehicle segment, the growth of the light commercial vehicle subsegment will be driven by the growth of the eCommerce industry.
The progress of the automotive policy development will continue to be minimal in 2021. The government’s focus will be on overall economic recovery and achieving political stability.
The global pandemic and domestic political turmoil resulted in declining economic growth in 2020, which then affected the sales of new vehicles. These contributing growth disruptions are expected to have a medium-to-long-term effect on the automotive industry. Thus, recovery is expected to be moderate.
The passenger vehicle segment will continue to lead new vehicle sales with more than 90% share. It is expected to grow at 4.2% CAGR between 2020 and 2025. On the other hand, the commercial vehicle segment is expected to record a CAGR of 7.5% within the same period. However, this segment is highly volatile and affected by macroeconomic and political factors.
