KUALA LUMPUR (May 12): Malaysia’s used-car market is expected to see a downtrend until 2020, so used-car dealers should find new ways – including the strategic use of apps via mobile platforms – to compete with new car sellers, said market researcher Frost & Sullivan.

In a statement on the release of its new report titled “Strategic Insight into Used-Car Market in Malaysia”, Frost & Sullivan said used-car sales volumes are projected to decline from 394,000 units in 2014 to 300,700 units in 2020.

It attributed the downtrend to competitive prices of new vehicles and the government’s pledge to reduce car prices under the National Automotive Policy 2014 (NAP), among others.

“Over the last few years, customer interest in used cars has been declining owing to intense price competition from new cars. In fact, approximately 60% of car buyers every year have been selling their used cars to purchase new cars,” the statement read.

The announcement of the NAP, which aims to reduce new car prices by 20% to 30% over the next five years, have also dampened buyer appetite for used cars, hurting an already ailing industry, it said.

This is because the used-car market in Malaysia "functions in tandem with the new car market", so any decline in prices of new vehicles will drag down the prices of used cars, said Frost & Sullivan automotive and transportation principal consultant Animesh Kumar.

“In these circumstances, customers are more likely to invest in new cars rather than used ones,” he added.

It also noted that the automotive industry is set to lose access to a majority of buyers – especially from the public services sector – as Bank Negara Malaysia (BNM) has put a cap on the number of loans that an individual can take.

To curb rising household debts, BNM has also raised the Overnight Policy Rate or OPR by 0.25 percentage points, deterring customers from taking loans and adversely impacting the new and used-car market, the statement read.

Consequently, many used-car dealers in Malaysia have been looking to cut down inventory to decrease exposure should new car prices drop unexpectedly.

“They have also been more selective in buying trade-ins, selecting only brands and models that can be sold off quickly,” it said.

Kumar recommended that used-car dealers design platform strategies involving mobile apps and virtual technicians to better educate, communicate and build relationships with customers to compete with new car manufacturers.