KUALA LUMPUR (Aug 22): While the implementation of e-invoicing has limited impact on automotive companies with an in-house vehicle financing arm, its impact on car sales will be significant, according to TA Securities in a note on Thursday.

"We anticipate that the implementation of e-invoicing in Malaysia will have a significant impact on car sales.

"According to our auto analyst, this is when it becomes mandatory for all taxpayers, regardless of their annual turnover or revenue, [to adapt to e-invoicing]. The new system is expected to pose challenges for buyers who may find it difficult to secure the 'full loan' amounts previously offered by certain sales agents," it added.

TA Securities said there were instances that invoices were "inflated", but the e-invoicing system introduces a more transparent and standardised method for documenting transactions.

“For the automotive industry, this means a more transparent purchasing process, where inflated invoice practices will be curtailed, potentially affecting how car sales transactions are conducted and financed,” stated TA Securities.

According to the Inland Revenue Board, an e-invoice is a digital representation of a transaction between a supplier and a buyer, replacing traditional paper-based documents such as invoices, credit notes, and debit notes.

E-invoicing was introduced by the government to benefit the economy by accelerating accounting processes, reducing fraudulent claims, and enhancing taxpayer compliance.

The first phase, which kicked off on Aug 1, involves around 3,500 companies with annual revenues of more than RM100 million, with the government handing a six-month grace period to taxpayers to ensure a smooth implementation.

Phase 2 is set to begin in January next year for companies with annual revenues of between RM25 million and RM100 million, with all other taxpayers expected to join by July 1, 2025, excluding those with annual turnovers under RM150,000.

Currently, the automotive industry has seen stable growth, prior to the introduction of Phase 1, according to TA Securities.

The Malaysian Automotive Association reported a 23.6% month-on-month increase in total industry volume (TIV), reaching 71,730 vehicles in July this year. The expected rise came after a temporary shutdown of some manufacturing plants for scheduled operational improvements the month prior.

The increase was further driven by a longer working month and the launch of new models.

Year to date (YTD), the industry has seen a 7.2% increase in TIV from the previous year, totalling 462,088 units, carried mostly by a strong passenger car segment performance, rising by 10% to 422,640 units, while the commercial vehicle segment declined by 13% to 39,448 units.

National car brands saw significant sales growth last month, with Perodua recording a 35.2% month-on-month increase and Proton at 39.1%.

Proton’s sales growth was attributed to the sales performance of the Proton Saga, while the Proton X50 achieved its highest sales figures of the year. YTD, Perodua has reported a substantial 16.6% increase in sales, reaching 201,900 units, while Proton experienced a slight decline of 2% to 88,799 units.

The total market share of national car brands remained relatively stable at 68.4%, improving from 68.0% in the first seven months of 2023.

On the other hand, the non-national car segment recorded a 4.1% increase from the previous month, reaching 18,800 units. With the exception of Honda, which experienced growth of 16.1%, all major brands reported lower sales in the first seven months of 2024.

In terms of passenger market share, Honda led with 10.9%, followed by Toyota at 9.4%, and Mazda at 2.3%.

Despite the introduction of new models, facelift versions and new variants, TA Securities maintains its ‘neutral’ recommendation for the sector, as future car sales are anticipated to be affected by the adoption of e-invoicing, as well as declining consumer sentiment, amid the implementation of targeted fuel subsidies.

TA Securities retained its 2024 TIV forecast of 700,000 units, a year-on-year decrease of 12.5%, and currently has a ‘sell’ recommendation on MBM Resources Bhd (KL:MBMR) with a target price (TP) of RM4.70, a ‘buy’ on Bermaz Auto Bhd (KL:BAUTO) with a TP of RM2.74, and a ‘hold’ on Sime Darby Bhd (KL:SIME) with a TP of RM2.85.