Perodua sales chief Zahari Husin on 52% market share, an eventful May and no tax holiday for the Myvi

Gomoku. That’s “five in a row” in Japanese. Last month, Perodua achieved market share of 51.9%, its highest ever. That may be a one-off, due to May being an extraordinary month for the car industry (more on that later), but the Malaysian auto market leader’s share of the pie in 2018 now reads 39.7%, 42.2%, 41.5%, 42.3% and 51.9% – round up January and that’s five in a row of above 40% share.

We posed last month’s question – is market share of above 40% the new normal? – to Perodua Sales managing director Datuk Dr Zahari Husin and he humbly laughed it off. That’s understandable, because it was just a few months ago that market share of around 35% was hailed as groundbreaking stuff.

It’s not just market share, but actual volume is up for Perodua. Year-to-date (YTD) sales till end-May is 97,487 units, which is 19% higher than May 2017 YTD of 81,854 units. YTD market share is 43.4%, from 35% at the same mark last year. Things are going swimmingly in Sg Choh, but it has been a year full of uncertainties so far, and there might be turbulence ahead.

Confident but cautious is the mood that I get chatting with Zahari, and in this second part of his exclusive interview with paultan.org (the first was about P2’s new SUV), the Perodua sales chief talks about the rollercoaster month of May, the once in a lifetime tax holiday we’re now in, long waiting periods and telling customers the truth about the Myvi.

DT: Perodua has been clinching market share records for five months now, can you elaborate on this Gomoku success?

ZH: Put it this way, TIV (total industry volume) was not that strong last year, and especially weak in the fourth quarter. Until end April, it had not fully recovered. TIV remains very weak, but for Perodua we managed to keep to our projected volume – even though the market dropped, our volume didn’t drop.

We did not do higher than what we’re supposed to do, or what we expect to do. There’s no tremedous growth in our registrations, we’re just maintaining our figures. Our 2018 sales target is 209,000 units, and what we have done so far until May is keeping that number – yes, memang on track. The TIV is down, and that’s why our market share is good.

But under these conditions, it’s considered an improvement, because when other players’ sales dropped, we still kept our position and our volume.

DT: May seemed like a crazy month, and that’s just us looking from the outside. It must have been intense from a sales point of view.

ZH: May was a very difficult month for everybody. In the first nine days, the focus and attention – not just customers, even our own people – was on something else… politics, elections. After the elections, we had a new government, holiday, long weekend and everyone waiting for GST to be abolished. The “wait and see” seriously hurt the market. I think it’s not just in automotive but other industries as well.

For Perodua, in the five days after the elections, we only registered about 110 units – five days, 110 units! Then the government annoucned the zero-rating of GST, but that announcement was made in the middle of May.

We came out with our own measure – a very costly measure – to subsidise GST (via cash rebates) till month’s end. Beacuse of that move, in the last two weeks of the month we managed to recover May volume, and actually went slightly above our target. For me, May was exceptional – 51.9% market share is the highest ever in Perodua history.

DT: You mentioned costly measures. How costly was the subsidising of GST in May, and how much will that affect your bottom line?

ZH: It’s very costly. It’s not something we can hide, you can calculate how much is GST. On average, it’s about RM2,500 per car, and as a volume player, there were more than 16,000 units involved in this campaign (over RM40 million).

I think it’s worth spending (the RM40m), but now we have to find ways to recover that. For recovery, we can do it in a few ways – one is to continue to have cost savings for the next few months, like ikat perut la, and we can try to increase our volume in the next few months.

But like I said, it’s worth spending. We get new customers, and this will later contribute to after-sales. Our volume when the (GST subsidy) announcement was made was only around 4,700 units, and if we didn’t do anything our volume for May would have been around 5,000 units (21,980 was the eventual figure). Imagine what would that have done to our network, to the dealers, stockholding, and so on.

DT: The decision to subsidise GST, was it a difficult thing to do, or was it all along in the plan?

ZH: Oh no, it was not in the plan. We have done some cost savings in the first four months, and we have been very prudent in our spending, our sales campaigns, and so forth. Luckily, those cost savings helped us in May. It was a very difficult decision, to do or not to do. We had to look from every angle. The decision was made in less than 12 hours from when we started talking bout it.

Registrations are now done online, so we allow registrations until 11:55 pm, but as we needed to change the GST system on May 31, we set 6:30 pm as our cut-off time. From 8:00 am to 6:30 pm, we registered almost 5,000 cars in a single day! That’s the second highest daily record, with the highest being before GST was introduced in 2015.

DT: What happens after the tax holiday?

ZH: We are worried about the post tax holiday period. I think everybody would be worried. At this moment, we are worried based on our understanding of the difference between SST and GST (rates), the impact to the selling price.

We know that SST will be reintroduced on September 1, the part we don’t know is how much the tax is going to be. We need the details as early as possible for us to make plans. Right now, we are working based on assumptions that sales tax will be back at 10% – if it’s 10%, car prices will definitely go up (compared to 6% GST) and that worries us.

For SST, we hope that the government will announce (the rate) as early as possible so that people know. They announced zero-rated GST two weeks before month end and that affected the market. If they announce SST earlier, that will help the market, provided that SST is higher than GST.

What we can do now is to encourage everyone to come and take advantage of this tax holiday. Buy cars now because this is the cheapest, especially with Raya offers and 0% GST – prices will never be as low as now.

DT: The Myvi has a waiting list, so can today’s bookings be registered within the tax holiday?

ZH: If you’re booking the Myvi today, the delivery will be in September, so there’s no tax holiday for Myvi. This is also a major headache for us. How to explain to customers? We have to tell the truth.

If you walk into our showrooms now, our SAs (sales advisors) will say: “Sir if you want to order a Myvi 1.5, the delivery will be in September and we cannot guarantee the price.” We have communicated this to our outlets, and we update our outlets once a week on the latest waiting period status – they will have to tell the customer, that’s part of the SOP.

Our focus now is to deliver as many Myvis as possible. Our colleagues in production are working very hard, even in the fasting month, to produce as much as possible, so that we can expedite deliveries. Not just to meet the demand for Raya, but to make sure that those who booked earlier will enjoy this tax holiday.

Some people have a tendency to buy cars through brokers, but brokers don’t have the latest information. My advice is go to our showrooms, talk to authorised people, and insist to know about the waiting period – they will tell you. We don’t want to hide this from the customer, beacuse if we cannot deliver during the tax holiday, that will upset the customers more.

Trying to deliver as many units as possible to those who have already booked, and to tell the truth about the waiting period to our new customers – that’s what we’re going to do.

DT: It sounds like Perodua is not very well placed to take full advantage of the tax holiday.

ZH: During this tax holiday, the ones that will benefit the most are those with sufficient stock. We don’t have problems with our supply, but that supply is based on the volume decided long before, because we did not know about a tax holiday – nobody knew.

Now, we have to review the volume upwards. We’ll continue to engage with our colleagues in production and our vendors. It’s not so easy to increase production volume, as there are a lot of parties involved. But so far so good; it has been quite positive, and we have been assured a slightly higher volume, but the increase cannot be that drastic. We have three months, we will continue to improve production.

Datuk Dr Zahari Husin talks about Perodua’s upcoming new SUV in the first part of our interview, which you can read here

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