Fuel prices, toll rates hold key to auto sales next year

PROMISING signs were seen in the Malaysian automotive sector this year after one-and-a-half-years of lacklustre sales, thanks to new models, easing of restrictions in hire-purchase loans, improving consumer confidence and steady job market.The sector clearly regained momentum in the second half this year, boosted by fiscal stimulus, including a significant pay hike for civil servants.But the current impressive run may be affected by rising inflation, including the possibility of another hike in petrol price and toll rates.“The Malaysian car industry is going through a new phase, a very competitive one. It is an uphill battle for some,” said an auto analyst said when commenting on the outlook of the industry.“Altough signs of recovery were seen in car sales, it is unlikely for the industry to continue the momentum next year if fuel prices and toll rates are raised,” he said.The government has indicated that the current petrol price would remain until the end of this year but rising crude oil prices have caused an increase in subsidies.Malaysia spends more than RM30 billion a year on fuel and gas subsidies and is now under pressure from rising crude oil prices.When the last petrol price hike was implemented — a steep 18.5 per cent to RM1.92 per litre in February 2006 — oil was trading at around US$60 (RM210 at that time) per barrel.But global oil prices are now above the US$96 per barrel, hitting a record high of US$99.29 on November 21.Given this situation, the Malaysian Automotive Association (MAA) is, however, still optimistic about the future direction of the local automotive industry.MAA president Datuk Aishah Ahmad said for the first 11 months of this year, total registered sales amounted to 444,932 units (with 404,793 passenger vehicles and 40,139 commercial vehicles).“So, 460,000 units in sales can be easily reached in 2007,” she told Bernama.“More likely, 2007 industry sales volume is estimated at around 475,000 to 480,000 units or a decline of around two per cent versus 2006,” she said.MAA had in July revised its original sales forecast to 460,000, a six per cent contraction, instead of its earlier forecast of 1.9 per cent growth.Total sales last year came up to 490,768 units.Judging by the current uptrend in sales, Aishah said the industry could expect to achieve total sales of 500,000 units next year.The launch of new models, such as the Proton Persona, Perodua Viva, Kia Spectra 5, new Toyota Vios and Mitsubishi Lancer 2.0GT, will keep fuelling demand in the coming months.Other factors that will help improve sales in 2008 include the wealth effect of the buoyant stock market, good economic conditions and the stabilising of the second-hand car market.Nevertheless, auto players might have to face several key challenges to maintain the current upward momentum in sales next year, Aishah said.“With the impending inflation and rise in oil price, toll and transport charges plus overseas and local source price increases, the greatest challenge for auto industry players in 2008 is how to maintain the current prices of motor vehicles,” she said.According to her, industry players must try to cut costs wherever possible to remain competitive next year.Aishah said an assurance given by the government not to raise import duties on foreign cars could help the industry.“What would have been preferred is for the government to ensure no increase in excise duties on the local sector for car prices to be more competitive in Malaysia,” she said. — Bernama