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Sales tax holiday for automotive sector to be extended?

Publish date: Tue, 14 Jun 2022, 10:53 AM

KUALA LUMPUR: There is a possibility of the government extending the sales tax incentives for the automotive sector beyond June 2022.

This was due to varying circumstances including supply chain disruption, foreign exchange (forex) and consumer pressure, Maybank Investment Bank Bhd (Maybank IB) said.

Maybank IB said the automotive industry continuedvto be affected by the global supply chain disruption (chips supply shortage). 

That, coupled with rising material costs and forex impact, had caused much lengthy delays to new vehicle deliveries, it added. 

"With less than one month left (before the exemption expires), most of the autos original equipment manufacturers are struggling to fulfil their outstanding orders. 

"While prospective consumers, especially from the price-sensitive markets, have been taking advantage of the sales and services tax (SST) holidays ahead of the expected expiry in June, a non-extension outcome could see major cancellations of orders, beginning July, with the second half's (2H) total industry volume is expected to weaken from that," it said.

Maybank IB said April 2022's TIV had fallen 23 per cent month-on-month (M-o-M), with production contracting by nine per cent M-o-M too. 

Maybank IB said an extension outcome would prove to be a popular and prudent choice to combat these macro and sentiment issues in the automotive sector, to allay consumers' frustration with non-deliveries before end-June 2022. 

"Various bodies, especially the Malaysian Automotive Association, have been a strong advocate on this issue. 

"Another extension would be its fourth, representing a 24-month of SST holiday, which started in June 2020. 

"That said, doing away with the SST permanently would be a sensible move. Otherwise, the policymakers need to come up with a well- thought solution to ease the reinstatement of the SST to vehicle prices, taking into account the rising inflation risk at the moment," it added.

Maybank IB has reiterated its "Positive" call on the sector, with TIV estimates remaining unchanged at 580,000 to 600,000 units.

The firm has also retained its "Buy" calls on Bermaz Auto Bhd, MBM Resources Bhd, Sime Darby Bhd, Tan Chong Motor Holdings Bhd and UMW Holdings Bhd.

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