Auto players fight for slice of pie

By

Datuk Aishah

MAA chairman Datuk Aishah Ahmad says the automobile industry outlook is rosy.

By T.K. Tamby

It may be the toughest fight in history but the political and economic uncertainties of this general election will have minimal impact on the growth of automotive sales for 2013, say industry observers and analysts.

The Malaysian Automotive Association (MAA) forecast 2.2 per cent growth for this year of 640,000 units. Research House TA Security forecast an average of three per cent growth while DBS Group Research predicts a growth of 2.2 per cent based on five per cent gross domestic product growth for 2013.

These forecasts are backed by Bank Negara Malaysia’s prediction of five to six per cent GDP growth for 2013 in its 2012 Annual Report, as a result of improving external trade landscape and growth in private investments. Domestic demand, which is to be the main driver of the economy, is expected to grow by eight per cent.

MAA chairman Datuk Aishah Ahmad says demand is rising because of strong consumer and business confidence, which can be attributed to the multiplier effects of the Economic Transformation Programme (ETP). The ETP is expected to boost domestic economy through the creation of new income streams.

While most analysts believe that these sentiments are strong enough to rise above the uncertainties created by the ongoing election and agree on a safe bet of a two to three per cent growth, Frost and Sullivan gives a pessimistic forecast of a four per cent drop to 600,000 units. Partner and head of automotive Kavan Mukhtyar is convinced that the present political climate will cause customers to hold back spending at least for the first quarter. “We expect consumer sentiments to pick up in the second quarter and turn robust in the following quarters.”

Last year, total industry volume surged to an all-time high of 627,753 units, up 4.6 per cent from 2011, despite the disruption in supply because of the floods in Thailand and the introduction of the stricter lending guidelines by Bank Negara. The total registration of new passenger vehicles rose by 3.2 per cent from 2011 to 552,189 units, whereas commercial units jumped by 16 per cent to 75,564 units.
MAA says that another significant factor is the aggressive sales campaigns by car distributors, offering attractive discounts and packages. Competition is caused by the presence of an increasing number of foreign players wanting to establish a foothold in Malaysia, with the aim of going regional with their brands.

Industry observers and analysts say that the growth in automotive sales this year will be mainly driven by foreign marques. They add that the aggressive price war and generous offers of incentives to capture market share will continue for the rest of the year.

According to Kalader Govindan, head of research for TA securities, this intense competition may mean an even tougher fight for local brand owners to retain their market share. “Local brands will lose market share for medium- and higher-end models while the market share for cheaper models will not see not see much difference.”

A veteran industry observer says price is not the only deciding factor. The lack of innovative new models can also work against local players, especially with foreign makers launching exciting new models with attractive prices, like the Nissan Almira.

“With liberalisation around the corner, local players will have no choice but to up their game. Competition will grow even tougher in the market place but demand will continue to grow, supported not only by economic growth but also the low cost of vehicle ownership, which is the lowest in the region,” he says.

 

 

Photo Credit (Featured): lynac via Compfight cc

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