HVGT, higher SST, targeted fuel subsidy to affect auto industry, 2024 Malaysian TIV down 19% – Maybank IB

Maybank Investment Bank is expecting the Malaysian automotive industry to be affected by the increase in the service tax rate and the implementation of the high value goods tax (HVGT) that will come into play in March and May respectively.

In a research note, the investment bank said the HVGT could impact premium vehicle sales, while the hike in the service tax rate from 6% to 8% is expected to add on to maintenance services and vehicle repair bills as well as vehicle insurance, increasing the cost of vehicle ownership, Bernama reports.

Another factor that could affect industry players is the planned targeted fuel subsidy mechanism, which is expected to be implemented sometime in the second half of the year. It said that after two consecutive record years of growth, the total industry volume (TIV) is projected to stabilise at 650,000 units in 2024, which is a 19% contraction from 2023’s numbers.

The research note added that the two key themes to watch for this year is the increasing trend towards adopting an agency model business and further acceleration of the transition to electric vehicles (EVs), with the country having emerged as an attractive destination for foreign direct investments (FDIs) from global automakers seeking to establish their regional headquarters or EV hubs here.

The investment bank said that the influx of FDIs is expected to have a positive long-term impact on the industry, contingent on the position of auto players in the supply chain. However, it added that local players in the production and distribution chain are anticipated to face intensified competition this year, which would have a potential impact on their margins.

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