The Malaysian automotive industry has been badly affected by the myriad restrictions placed by the government in an attempt to stop the spread of Covid-19. The auto sector has been effectively shut down since the nationwide movement control order started in May, before it was escalated to a full lockdown in June.
What is obvious is that car showrooms have been closed in the current Phase 1 of the National Recovery Plan (NRP). But as the automotive industry isn’t considered as “essential”, even the factories have been idle, so the disruption is in both production and sales. Parts suppliers too, so the entire ecosystem has been frozen.
UPDATE: A note on the plight of the sales advisors, and how they are affected
In its 1H 2021 market review briefing yesterday, the Malaysian Automotive Association (MAA) slashed its forecast for the 2021 total industry volume (TIV), which is the total sales of passenger and commercial vehicles in the country. The original 2021 TIV forecast announced early this year was 570,000 units – it’s now down to 500,000 units. Total sales in 2020 was 529,434 units.
“MAA has decided to revise our forecast for the TIV 2021 after considering many factors, especially concerning an assumption on the government’s directive that automotive plants, distribution centres and sales showrooms would not be allowed to operate during Phase 1 and 2 and will only reopen in Phase 3 of the NRP,” MAA president Datuk Aishah Ahmad said.
While the whole chain is affected, it’s the dealerships are bearing the brunt of the effects. It’s simple. They rely on sales and commission, and when you can’t sell cars, there’s no income for the sales advisors and the dealership. Even if they could open, there are no cars to sell as local factories have been idle, and imports are stuck at the port. It’s bad.
“All our members are very concerned about the current situation. We do not know when our showrooms can open, and for plants to produce CKD vehicles. This is our worry. A lot of the small dealers are already very tight with cashflow and if this continues, there will be retrenchments,” Aishah said in yesterday’s Q&A session.
“The dealerships are independent dealers and their cashflow is limited. If there are no sales, they still have commitments to fulfil – rental, salaries and all that – and yet there’s no income. The only thing they can operate is the workshops, and even that is with limited staff. So, because of that, many have indicated that if this MCO is extended, many will have to say goodbye to the industry because they cannot survive any longer,” she lamented.
The impact is even greater on sales personnel. Unlike other salaried employees, a major portion of their take home pay is from commissions, and their basic pay is low (think minimum wage). Aside from commissions, incentives and bonuses from car sales, SAs also earn commissions from ancillaries such as insurance, accessories, tinting and more. They will be digging into savings now, for sure.
Aishah revealed that MAA, like many other industry associations, has sent several appeals to the government asking for permission to conduct sales and assembly operations with strict SOPs and controls, and “maybe up to 60% of staff” in showrooms and plants. She said that the plan to allow businesses to resume once workers are vaccinated is encouraging.
On how the car companies can assist their dealers who are feeling the crunch, Aishah said that apart from giving leeway in payment, there’s nothing much the OEMs can do, as they’re also in a difficult spot.
“There’s nothing going to the dealers right now – we can’t get vehicles from our plants, and CBUs are also not coming in – the carmakers themselves are very highly stocked. The CKDs that we ordered four months ago are at the port, and clearance is very slow.
“In terms of payments, some of the franchise holders and OEMs make it easier for the dealer; they don’t push them to pay up so soon. But to give them support financially, I think the OEMs also find difficulties at this moment in time.
“So, we’re hoping the govt will ease the MCO conditions to enable us to survive, and to be able to start selling so that we get income. Once the OEMs are able to operate, then dealers will be able to operate. The only good news is that the SST exemption is still there, and the orders are still coming in – but we cannot deliver, and that’s the problem,” she stressed.
The arrival of Covid-19 has seen sections of people and businesses suffer from the effects of movement control. If the extent of your hardship is losing freedom to travel and roam around, you’re lucky. Many have been relying on savings to tide over, but the proverbial payung won’t last forever.
“You must bear in mind that this is the second year. In the first year maybe you have savings, but now we have exhausted whatever reserves we have,” Aishah said, referring to dealers that are on the edge.
Here’s hoping that the rain will stop soon, and the industry gets a warm blanket in the form of another SST exemption extension.
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Toyota close shop soon
Mr.Axxx,
We should not rejoice and wish UMW Toyota close shop.
If their dealers or branch do kaput, are you happy that the staff have to join the foodbank,or borrow from along?
Honda outlets are operated by private dealerships.It is UMW and perodua that have more branch offices.
Some Honda dealerships reportedly are waving the white flags next month,given the fact covid has 15000 cases today.
Someone said,” there is light at the end of the tunnel.Unfortunately,it came from a speeding bullet train,on the same track..but opposite direction.”
Business is all about survival of the fittest, those that have regular customers, have high product desirable, good after sales service, high customer loyalty will thrive. Those brands that are constantly cheating us and underspec their cars (See: Toyota & PErodua) can go to h3ll.
Your Excellency Celup King
I think u miss the point.Datuk Aishah said the plants cant produce anything now.
Even if perodua or proton have blockbuster insane orders,no one can lift a screw driver at the factories.
It has nothing to do with quality service or top salesman talk or brand loyalty.
Lockdown= Zero Production of cars,FAHAM?
YBAjibkor/YBAlbert. This is YOUR comments is it not;
YB Albert on Jul 02, 2021 at 12:23 pm
The saddest reality is the real total lockdown should have been done in mid May.
Why the flipflop? Just stop. Grow up. Handling pandemic isn’t for kiddies that cannot comprehend the necessary actions taken here.
Seriously Toyota first to go?.. i thought they are more secure than other car marker…
Toyota as a brand is fast going downhill even before pandemic
Business affected. Job affected. Personal life affected. Even children life not spared. All walk of life kena kaw-kaw.
Why is it that with months of lockdown and darurat implemented still having rising covid cases? Can Malaysia Official no. 1 answer this simple question?
Sebaba saya gagal king official 1 reply….in my dream…
You seem drunk or did you use Google Translate from mother tongue?
The easy answer is sebab Selangor dah gagal
The hard answer is sebab PH running Selangor dah gagal
The best answer is both are the reasons why am ditching them.
Wasn’t it supposed to be KL dah Gagal jangan support Kerajaan because they lied with 110% vaccination and yet we still get a 2k+ Covid 19 cases in KL which based on KL:Selangor population ratio, the infection is the same but Selangor only had 33% vaccination.
Copy paste: “Who are you kidding stop the drama please ! What a joke ! YES it is affecting everyone but don’t over drama …”
This is YOUR comment is it not:
Tutup kilang oi… sampai 2040!! Nyawa lebih penting dr Duit! Datuk Aishah nih xreti pikir ke.
Just another SST exemption will not do the job. Ask for some % of Excise Duty discount. That will be significant to boost the sales. NO sales means no tax…think win win
1 FORD Raptor sold in kedah. bravo PN gahmen!
1 Raptor compared to the T-Rexes that PH bought? Meh!
You mean car dealership is so unprofitable when they spend millions for 3S 4S or 5S mega dealership ? A few months of little sales need to close ? Who are you kidding stop the drama please ! What a joke ! YES it is affecting everyone but don’t over drama …
Boss, how do you know they use their own cash or borrow from bank to fund their expansion plans?
Bank loan LAH.. No point to explain to them, they still think car industrial is easy money. 0(zero) sales but still need to pay for bank lah, SA basic salaries lah, maintenance lah.. Blah blah blah. The bigger the dealer, the faster will facing close down.
Bank loan LAH.. No point to explain to them, they still think car industrial is easy money. 0(zero) sales but still need to pay for bank lah, SA basic salaries lah, maintenance lah.. Blah blah blah. The bigger the dealer, the faster will facing close down.
Agree. I think this kind of wayang just to soften Menteri’s neck just to let them operate sooner. Why? Cant u see with all the moratorium, ISinar n ICitra money all the rakyat have, how much they could grab. Sooner is better before rakyat pay the money elsewhere.
Automotive only one of the many sectors being affected at the moment but since they have not contributed to the clusters then I believe they should be given consideration. It’s those construction clusters that need to stop work.
Also this SST would have to continue well into 2022 along with the HOC as property and vehicles are the 2 big purchases that a consumer would do and 2021 ain’t looking like a recovery period as it’s just a continuation of 2020’s predicament.
I am very disappointed with the MAA president. When our ‘brilliant’ Transport Minister made a statement that car sales were not effected as people can still buy car’s online, why didn’t she say anything!?
Because you din belip her when she told us that our NAP is better than others, our car prices is not high, that our national car brands creates more jobs & more values compared to Thailand or Indonesia?
What is MAA doing? How can they help the dealers?
Don’t do forecast only, do some analysts about Malaysia market setution, what’s going on at Malaysia situations, give more more discounts.
good riddance
Tunggu triton dr awal bulan 5 ni..fasa 3 bln 9 kan? Lama wehh
It is the entire ecosystem that is affected. I know a guy was supposed to receive his vehicle around 15th of May 2021 … I saw a second hand car dealer moving his vehicles to a different location… Sad to see this because it is not only the automotive sector that is hurt. At our office complex perhaps 80% of the restaurants have closed down.
The Japanese will not sustain downfall with you’ll hardship. Their economy rely on American and European market since defeated ww2. Data is bad they retrieved, reaaon why they were here simply because our Market consume isolated technology, parts and model they no more value in Europe. Parts also cheapest they give from Daihatsu for Malaysian.
time to open up AP market so that all get to help the motor industry.
Prepare for the worst. inflation, stagflation and global recession on the way with new delta variant.
not even lower price edy tutup?