Car showrooms are going to be busy places in the next one and a half weeks, with a surge in vehicle bookings expected following the announcement made by finance minister Tengku Datuk Seri Zafrul Abdul Aziz on the status of the sales tax exemption.

Yesterday, he said that the SST exemption will not be extended any further and that it would come to an end as scheduled on June 30, but the government is making an allowance for the SST exemption to be applied for any vehicle booked before July 1 and registered before March 31, 2023.

A spike in bookings before the month is out is thus expected, but while this will create a swell in orders for June, it could result in a potential sales glut for the remainder of the year, as The Star reports.

An analyst interviewed by the publication said there is the likelihood of an “order avalanche in the next 10 days” happening, as potential car buyers take advantage of the limited time left before the tax holiday ends. “Key implications include a likely surge in orders for the rest of June, bringing forward some sales from the second half of 2022,” he said.

This sentiment was shared by an industry observer, who cautioned that the discontinuation of the SST exemption could have the same implications as the tax holiday that was implemented in 2018. “When the government zero-rated the goods and services tax or GST for three months in 2018, it resulted in a spike in demand for vehicles. After the tax holiday ended, car sales were affected for quite some time,” he explained.

Meanwhile, Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said the time extension will assist car companies to clear the backlog of orders. “Hopefully, the shortage of chips and components would be resolved by then,” she told the publication.

She said the association thanked the finance ministry for the concession to apply the SST exemption for vehicles sold during the exemption period until March next year. “We have a backlog of orders and so the move to allow until the end of March 2023 to register new vehicles that were booked by June 30, 2022 will pacify those customers who have a long waiting time,” she explained, adding that the move will also hinder order cancellations by customers.

She echoed the observation made by the industry observer with regards to the expected dip in sales once the SST exemption ends. She said the order bank is expected to slow down after June 30 before picking up again. “It has always been like that when there is a change in policy,” she said, but added that MAA expects to achieve its total industry volume (TIV) target of 600,000 units for 2022.

The SST exemption was first announced in June 5, 2020 as part of the Penjana stimulus package to mitigate the effects of the first movement control order, which took place from March that year. Originally scheduled to end on December 31 that year, the SST exemption was extended at the last moment to June 30, 2021, and then again to December 31, 2021. A third extension, which is the current one, was announced during the tabling of Budget 2022.