Kenanga Research: We believe the new volume-driven launches in the fourth quarter of the this year, namely the Proton X50, Honda City and Nissan Almera, could help improve consumer sentiment with back-logged booking to overflow into 2021, which would also be boosted by the sales tax exemption, seasonal promotion and new launches in the second half of the year. PETALING JAYA: Analysts are projecting stronger car sales, following the vehicle sales tax exemption that has been extended another six months until June 30. TA Securities, in a report, said it is revising its 2021 total industry volume (TIV) higher by 5.9% to 627,000 units. “We believe the sales tax exemption will help to increase car sales in 2021. “During the sales tax exemption period, the TIV growth from July to November 2020 had increased by an average of 14.5% year-on-year. “This has helped to moderate the year-to-date November 2020 TIV contraction to 16.7% from the 41.1% contraction during the first half of this year. The weak first half car sales were due to the Covid-19 outbreak and the movement control order imposed by the government.” In light of the higher TIV projection, TA Securities is also adjusting the earnings of companies under its coverage higher by 2.8% to 15.7%. “This has raised 2021’s sector earnings by 5.8%, ” it said. Meanwhile, Kenanga Research said it is upgrading the local automotive sector to “overweight” from “neutral”, as it sees stronger recovery in 2021 with TIV growth of 17% to 585,000 units. “No change to our 2020 TIV target at 500,000 units, but we envisage a stronger recovery in 2021. “We believe the new volume-driven launches in the fourth quarter of the this year, namely the Proton X50, Honda City and Nissan Almera, could help improve consumer sentiment with back-logged booking to overflow into 2021, which would also be boosted by the sales tax exemption, seasonal promotion and new launches in the second half of the year.” Overall, Kenanga Research said 2021 could also be a potentially better year, supported by new launches, programmes under the National Automotive Policy 2020, positive impact from Bank Negara’s overnight policy rate cut and pre-emptive measures to assist those who might be financially challenged by the pandemic. “Our research team is also of the view that an expected global growth recovery and the impact of the large fiscal stimulus on the domestic economy would result in a projected growth rebound in gross domestic product to 6.1% in 2021, compared with a drop of 5.1% this year.” Under the vehicle sales tax exemption, which was initially announced in June, locally-assembled cars will be exempted from sales tax while for imported cars, the sales tax will be cut from 10% to 5%, until Dec 31. Under the extension, the sales tax exemption percentage remains unchanged. Earlier this month, the Malaysian Automotive Associatio (MAA) revealed that total vehicle sales continued its year-on-year upward trajectory for the sixth consecutive month in November, rising 7.4% to 56,489 units from 52,584 units in the previous corresponding period. The pick-up in sales was mainly due to the government’s tax exemptions and aggressive promotional campaigns by automotive companies continued to drive sales. Despite the year-on-year pick-up in sales, November’s TIV was 0.3% lower on a month-on-month basis compared with October. Year-to-date November, TIV is still far off compared with last year, with total sales standing at 454,708 units compared with 549,439 units in the previous corresponding period. On the outlook for December, the MAA said sales volume is expected to be much higher than November’s. The association said the higher sales would be spurred by continuation of the impetus from sales tax exemption incentives for passenger vehicles, as well as the ongoing aggressive promotional campaigns by car companies. In July, the MAA announced that it was revising upwards its vehicle sales target for the year by 17.5% to 470,000 units as the grim economic outlook is likely to be buffered by the various incentives recently announced by the government. Nevertheless, the projection would not only mean that sales this year would be a 22% contraction from 2019’s 604,287 units sold. It would also be the first time in 13 years since TIV failed to surpass the 500,000-unit mark. In April, the MAA revised downward its 2020 TIV forecast to 400,000 units from the 607,000 units it had projected in January.
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