Tax exemption drives on Bermaz car sales

PETALING JAYA: Bermaz Auto Bhd’s (BAuto), which has experienced a persistent surge in orders, is expected to continue its strong momentum at least until the end of this year, as the sale tax exemption is expected to keep demand for vehicle sales steady.

Maybank Investment Bank Research (Maybank IB) said BAuto has had strong sales since the sales and service tax (SST) was exempted on all models (equivalent to 4% and 7% of vehicle’s purchase price) from June 15 until Dec 31.

“We expect this strong sales trend to continue until December 2020, at least, when the SST exemption ends. We maintain our vehicle sales estimates for BAuto at 11,000 and 12,000 units for 2021 and 2022 respectively, ” the research house said in a report yesterday.

While the SST exemption is a timely boost, the research house said BAuto and the majority of the other auto players are also offering prospective buyers attractive rebates to improve sales.

“This impacts 1% to 3% of their margins. For that, we have lowered our 2021 and 2022 earnings estimates for BAuto by 34% and 16% respectively on lower earnings before interest, taxes, depreciation and amortisation margins. After taking into account the margin revisions, the street’s earnings estimates for BAuto are optimistic, in our view.”

BAuto is the franchise holder and sole distributor of Mazda vehicles in Malaysia and the Philippines.

Maybank IB said BAuto aims to add another CKD model in Malaysia. “It will be a positive if it materialises, for a lower price tag vis-à-vis CBU specs will entice prospective buyers.”

Citing the Malaysian Automotive Association’s (MAA) statistics, Maybank IB said Mazda’s vehicle sales have risen 66% quarter-on-quarter to 2,707 units from May to July of this year, averaging 902 units a month.

According to the MAA, total vehicle sales rose 13% year-on-year to 57,552 units in July, compared with 50,854 units in the previous corresponding period as the government’s tax exemptions and aggressive promotional campaigns by automotive companies continued to spur car sales.

Total vehicle sales in the first half of 2020 plunged 41.1% to 174,675 units from 296,317 units in the previous corresponding period after the movement control order to curb the Covid-19.

In July, the MAA announced that it was revising upwards its vehicle sales target for the year by 17.5% to 470,000 units, as the grim economic outlook is likely to be buffered by the various incentives recently announced by the government.

Nevertheless, the projection will not only mean that sales this year would be a 22% contraction from 2019’s 604,287 units sold, it would also be the first time in 13 years that total vehicle sales failed to surpass the 500,000-unit mark. In April, the MAA revised downwards its 2020 TIV forecast to 400,000 units from 607,000 units.

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