Extension of Sales Tax Exemption Until June 2021 Expected to Boost Automotive Sector

Jan 2021

The total industry volume (TIV) of Malaysia’s automotive sector is forecasted to increase in 2021, driven by the sales tax exemption extension under the National Economic Recovery Plan (Penjana) scheme. The sales tax exemption was introduced in June 2020 for six months but has been extended until June 2021.

Kenanga Research firm foresees a strong recovery for the automotive sector in 2021, with a TIV target of 585,000 units, a 17% increase from the previous year. Meanwhile, AmInvestment Bank Bhd expects the TIV sales volume to be stronger in the second quarter of 2021 (2Q21) with an average of 45,000 to 50,000 units per month. Malaysia’s average monthly car sales average at around 40,000 to 45,000 vehicles in the past five years.

National brands, namely Proton and Perodua are anticipated to outperform non-national brands by 16% year-on-year volume growth in 2021 due to new launches. In terms of non-national brands, Japanese marques such as Honda, Toyota, Nissan and Mazda will see higher sales volume delivery as these automakers derive over 70% of their sales volume from completely-knocked-down (CKD) models, which enjoy the full 100% sales tax exemption. The 100% sales tax exemption is given for the purchase of locally assembled vehicles, while only a 50% exemption is given for buyers of imported cars.

(Sources: The Star; Malaysian Reserve)

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