Car bookings will spike, followed by cancellations next year due to SST exemption leeway – Maybank IB
We’re no dealers, but we can imagine that showrooms are currently chock-full of customers looking to cash in on the sales and service tax (SST) exemption, which ends in exactly one week. While the government refused to extend the tax holiday, it has decided to push back the expiry date for vehicle registrations to March 31, 2023, giving car companies ample time to fulfil the onrush of orders.
Trouble is, of course, this will encourage many individuals to literally make bookings on a whim, even if they have absolutely no intention of buying a car – only so that they can lock in that rebate, just in case they want to use it at some point. This has dire consequences for the automotive industry, with Maybank Investment Bank predicting a wave of cancellations over the next nine months.
In a research article, picked up by Bernama, analyst Liaw Thong Jung said this will cause “unnecessary” operational issues on the dealer side, as “prospective buyers can cancel and/or transfer their orders and secure deposit refunds anytime.” The spike in orders, he added, will also “skew the bookings” and cause a lull in July and the rest of the second half of the year, which would not look good on salespeople and dealers.
Liaw also expected certain buyers to request for delivery in 2023 in the hopes of snagging a newer 2023 vehicle instead of a 2022 one. “That could see weaker 2H22 [second half of 2022] and strong 1Q23 TIV [first quarter of 2023 total industry volume],” he wrote.
Maybank IB is maintaining its 2022 TIV forecast of between 580,000 and 600,000 units, Liaw said, adding that the SST exemption – which has been extended three times since the original end-December 2020 deadline – has proved popular with 868,422 vehicles sold during this period. This, he wrote, also helped counter the economic impact of the COVID-19 pandemic.
Liaw also said that while finance minister Tengku Datuk Seri Zafrul Abdul Aziz claimed the government lost RM4.8 billion in revenue through the SST exemption exercise last week, the boost in income from import and excise duties during this period would “far outweigh” this loss.
Had SST not been waived, he noted, customs would have collected lower taxes due to reduced sales. “Excise duties alone accounted for 67% of [automotive] tax in 2019,” Liaw wrote.