Growth in Malaysian vehicle sales is expected to slow sharply in the second half of the year as consumers turn cautious after a recent steep rise in pump prices, top Malaysian carmaker Perodua said on June 24.
Car sales will only grow 6 percent for the whole of 2008 after surging by more than a quarter in the first five months of the year, said Perodua managing director Syed Hafiz Abu Bakar.
The government announced on June 4 a broad overhaul of its energy pricing system, raising petrol price by a hefty 41 percent and diesel by 63 percent in a move to ease the state's burden funding expensive subsidies.
"Before the fuel price hike, even a 10 percent increase is still something everyone can dream about," he said.
Hafiz said he was expecting Perodua, the largest passenger carmaker in the country with a 39 percent share, to achieve 5 percent growth in sales for 2008. Vehicle sales had been robust so far this year but the prospects for the second-half would be tough, said Hafiz.
Auto sales jumped 25 percent from a year ago to 47,931 units in May. For the first five months, sales were up 29 percent at 228,984 units, industry data showed.
"If you look at the first half, you would probably see a 30 percent growth from the same period last year," Hafiz said. The strong growth was not surprising given the low comparative sales figures from last year, he said.
"Any growth in the first-half is not really a big deal as the base was low. For us, the second-half is the challenge," he said. Sales will take a further hit if banks adopt more stringent rules in approving new loans as rising inflation likely leads to higher bad loan rates, he said. Malaysia's central bank forecasts inflation to rise to a 10-year high of 4.2 percent this year and economists expect the bank to raise its key interest rate to 4 percent from a current 3.5 percent by the end of the year.
Higher borrowing costs would crimp demand for big-ticket items such as cars and houses. Moreover, the default rate of car loans may also edge up, prompting banks to tighten their lending procedures for new car loans, Hafiz said. "If the reduction in disposable income leads to higher non-performing loans, that will be the tipping point," he said.
Malaysian energy-to-automotive group UMW Holdings is the largest shareholder of unlisted Perodua, with a 38 percent stake. Another automotive firm, MBM Resources, owns 20 percent of the company.
Japanese auto maker Daihatsu Motor Co Ltd is also a major shareholder with a 20 percent stake. At the close, shares of UMW, which also sells and assembles Toyota cars, were up 0.8 percent at 6.20 ringgit. The stock has fallen 7.5 percent over the past month.
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