The Malaysian Automotive Association (MAA) is appealing to the Malaysian government for the extension of the current sales tax exemption, which will end June 30 this year. “The MAA has appealed to the finance ministry to extend the sales tax exemption, but so far, we have not received any feedback,” MAA president Datuk Aishah Ahmad told The Star.

The local automotive industry could see a surge in sales for the months of May and June as there remains less than two months to go with the sales tax exemption, Aishah said.

Meanwhile, RHB Investment analyst Jim Lim said that vehicle sales in the second quarter of 2022 is expected to be strong as customers are expected to try and take advantage of the remaining sales tax exemption period.

“From the latest March production figures, we can see that carmakers are ramping up production to the best of their abilities, and amidst chip and parts shortages, to help customers take advantage of the sales tax exemption before it ends,” Lim said.

“When the government zero-rated the goods and services tax (GST) for three months in 2018, the temporary tax holiday created a huge surge in demand for cars,” The Star quoted an industry observer as saying.

Many just wanted to capitalise on the lower prices, but when the tax holiday ended, vehicle sales immediately plunged, not just because prices [then became] higher, but because nobody wanted to buy [cars] anymore. For months after the tax holiday ended, many auto companies were struggling to sell new cars,” the industry observer added.

As for the June 20 SST holiday cut-off, the more affordable brands such as local makes Proton and Perodua are more likely to face a larger impact as their customers are more price-sensitive, while conversely premium brands are likely to be less affected, said Lim.

The zero-rated GST pricing structure took effect on June 1, 2018, resulting in a 50% jump in vehicle sales compared to the preceding month which was also a result of customers holding back on purchases in wait for the prices at zero-rated GST. This brought the second-best ever monthly TIV in Malaysian automotive history.

This was followed thereafter by sales and services tax (SST) which took effect September 2018, and vehicle deliveries were 52% lower that month (31,241 units) compared to August 2018 (65,551 units). The MAA attributed the decline to car companies depleting vehicle stocks due to overwhelming demand in the zero-rated GST period.

More recently, vehicle sales in Malaysia for the month of March 2022 saw a total of 73,222 vehicle deliveries that month, which was up 28,171 units or 62.5% over the monthly tally from February.

Compared to the same month last year, March 2022 vehicle sales were 12.76% (8,284 units) higher, while the year-to-date total for the first three months of the year was 159,752 units, or a gain of 7.8% (11,597 units) compared to the same period last year.