This article first appeared in The Edge Malaysia Weekly on March 30, 2020 - April 5, 2020

THE auto industry is bracing for tough times as the month-long Movement Control Order (MCO) from March 18 until April 14 has brought sales to a screeching halt.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad did not divulge details but observes, “It (sales numbers) will definitely be bad.”

Asked to put a figure on it, she says in a brief conversation with The Edge, “I don’t have a figure but, considering everything was closed from March 18 and may resume only on April 14, it (sales numbers) is definitely going to be down.

“We can’t say by how much.”

Earlier this year, MAA had forecast a 0.5% increase in total industry volume (TIV) to 607,000 units for 2020, or 2,703 more than the 604,297 units sold in 2019.

However, the forecast was made before the MCO took effect on March 18. Thus, it is not clear whether the target for this year will be revised.

MAA had further forecast sales for 2021 to hit 619,200 units, or 2% more than the projected figure for this year. For 2022, sales were projected to attain 632,220 units, in 2023, 646,050 units, and in 2024, 660,920.

Checks with auto sector executives indicate that MAA’s numbers are likely to be revised lower — for 2020 at least. One industry source says a high-end auto company registered a sharp 60% contraction in sales in February from a year ago, and is expecting worse is to come, given that March and April sales will be adversely affected by the MCO.

MAA’s website says Mercedes-Benz and BMW sales last year totalled 10,535 units and 9,300 units respectively, giving the two marques a market share of 1.7% and 1.5% respectively.

This is a decline from 2018 when Mercedes-Benz sold 13, 462 units and BMW, 11,178, giving them a market share that year of 2.2% and 2% respectively. Sales have dropped by 21.74% and 16.8% respectively over the past year.

The two car companies release sales figures every quarter, and their numbers for the first quarter will only be known by the end of this month.

It is understood that the management of at least one large automotive player is looking at a fall of more than 50% in March sales. An official says his company’s expectation is in line with that of the industry. Considering the shutdown commenced around the middle of the month, an expectation of a 50% decrease seems reasonable.

Even mid-range cars have not been spared. A high-level executive from a conglomerate dealing in mid-priced cars foresees sales for this month to be only 25% to 30% of the level seen during a more typical March or April.

“You have to understand that auto purchases are not usually done out of necessity ... maybe compulsion or an urge. There was political upheaval in the later part of February, and a movement restriction order in March that will go on until mid-April. How can you sell cars in such an environment?” he asks.

In February, MAA figures showed auto sales of 40,403 vehicles, a gain of 590 units, or 1.5 %, compared with the 39,813 units sold in the corresponding month a year ago.

However, sales in February shrank 5.3%, or 2,249 units, compared with January because of the shorter work week owing to the Chinese New Year holidays and delays in the introduction of new car models, such as the facelifted Honda Civic and Accord.

“Getting loans from financial institutions have been difficult as well,” says the executive from the local conglomerate.

Nevertheless, the combined market share for the national marques have surged to a record high of 78.7%. Perusahaan Otomobil Nasional Kedua Sdn Bhd (Perodua) increased its sales in February by 18,895 units, up 8.1% from 17,481 units in January. Sales by national automaker Proton Holdings Bhd also gained 17.3%, from 8,506 units in January to 9,974 in February, buoyed by the introduction of the locally assembled X70.

Kenanga Investment Bank says in a research note that the fast-spreading Covid-19 and MCO will have an adverse impact on the economy in the short term as showrooms have been temporarily closed, vehicle production halted and deliveries delayed for all marques.

“Going forward, the full impact would depend on the outcome of containment measures and whether movement restriction would be extended,” the research house says.

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