Car sales in Malaysia still on shaky ground as Ringgit weakens

After car sales in Malaysia plummeted some 33% after the implementation of the 6% consumption tax on 1 April, it was hoped and expected that the festive season and aggressive promotions would boost sales. There were some really enticing sweeteners offered to coax uncertain car buyers to sign on the dotted line. (See: Car makers offer Raya sweeteners post-GST to boost fallen sales). But total vehicle sales in July still fell 2.69% from the same month last year, according to data from the Malaysian Automotive Association (MAA), even though it was 2.1% higher than June sales, as consumers have decided to “wait and see”. To “see” if car prices will decline? Unlikely to happen. To “see” if their incomes will improve? Unlikely to be enough to matter. Total vehicle sales year-to-date has declined 3.2%, from 393,425 to 380,830 units but MAA forecasts that August sales will continue to go up…slightly.

It doesn’t help that the Ringgit has been falling without any reprieve in sight. The currency has been sliding for 11 straight weeks in the longest downward trend it has experienced since 1993 as low fuel prices continue to limit the net oil exporter’s profits. Of course, the political turmoil that has engulfed the nation is not helping matters at all.

For the country’s top selling automaker, increasing prices is an option it has to consider if the Ringgit continues to depreciate against the US Dollar. According to Perodua’s CEO, Datuk Aminar Rashid Salleh, “A total of 90% of Perodua components are built locally, however some of the other components are imported using the US Dollar, which is bleeding the company.” Ouch. And this is coming from a carmaker that has been seeing strong sales despite the Goods & Service Tax, ending the first quarter of 2015 with a 30% increase in sales, thanks to strong demand for the Axia. Aminar even once said to the media that the company was having a bit of trouble keeping up with demand for the affordable hatchback (in your face, Proton).

The Ringgit now stands at about 4.25 against the US Dollar. Aminar said, at the launch of the new Perodua Sentral sales & service centre (pictured below), “As the US Dollar strengthens further, it has affected 5% of Perodua’s profit before tax and Perodua is trying its best to maintain its prices and hopefully things will get better.”

Yeah, the nation hopes with you, Aminar, and so do the employees of other automotive players in the country, after Naza Automotive Manufacturing retrenched 300 employees at its Kedah plant, which assembles cars for the Kia and Peugeot marques.

Naza, which is also the Malaysian distributor for Ferrari, Maserati and Harley Davidson, to name a few, has been mostly uncommunicative about the lay-offs, but in a short statement said, “We have undertaken an exercise to rationalise the staff strength at Naza Automotive Manufacturing given the tough economic conditions brought about by the weakening ringgit and domestic and export demand.”

image: paultan.org