Bye-bye 2018

The Malaysian automotive market in 2018 was saved by the three months Tax Holiday declared by the new government. With more than 200,000 units registered in the months of June, July and August, the TIV for 2018 saw a 3.92 per cent growth compared to 2017. Otherwise, looking at the cumulative performance of other than those three months, the total sales in 2018 was much lower than 2017. Thus, the higher sales recorded in 2018 was rather artificial and does not reflect the true picture of the market condition.

225,212 units were registered before the beginning of Zero Rated GST, 8,968 units lower than the same period in 2017. However, with strong sales performance in June, July and August, the accumulated sales up to end August was 423,730 units, 10.1 per cent higher than the same period a year before. When the Tax Holiday ends, total sales for September until end December was only 176,154 units, 15,761 units lower than the same period in 2017 marking a total Seles of 599,256 units for 2018, 22,622 units higher than a year before. Official result for December and 2018 TIV is pending to announcement by MAA.

Tax Holiday attracted high advance purchases due to extra ordinary  lower OTR prices. As a result, the market failed to stay in positive momentum after August. This, probably will continue even in 1st quarter 2019.

National brand is expected to take 48.7 per cent of market share, 0.9 per cent better than 2017. Honda is likely to close with 102,351 units in 2018 and will continue to be the best-seller brand for Non-national at 17.1 per cent share despite a shortfall by 7,160 units in volume compared to 2017.

For December 2018, the performance was much lower than what was recorded  every December in many years before. On top of the advance purchase during Tax Holiday, the  supply condition of many OEMs were also low due to unexpected high delivery to fulfil the demand during the Tax Holiday. In managing the expectation, many OEMs also continue to subsidise the gap between the 10 per cent SST against the 0 per cent GST. It was a costly exercise and resulting to a smaller budget left for Year End Sales as compared to previous years.

The TIV for December 2018 is expected to close around 48,730 units, merely 1,820 units higher than November and 6,002 units or 11 per cent lower compared to the same period in 2017. This was the first time that the TIV for the month of December to be closed lower than 50,000 units since 2012.

Honda is expected to record 8.090 units, followed by Proton at third place with 5,830 units.

Perodua on the other hand, continued to record stronger volume and share in 2018. Despite the halted Myvi production (Myvi contributed 50 per cent of Perodua monthly volume) for two months in August and September, Perodua managed to register 18,402 units, an equivalent to 37.8 per cent share in December and ending the year with 227,243 units or 37.9 per cent share, recording an annual growth of 10.9 per cent compared to 2017. Both , the total registration and annual market share marked new record high for Perodua since 1994.

For me, it has been an exciting yet challenging year from the perspective of car sales. There were many unfavorable influencers to the market but the unexpected declaration of Tax Holiday really changed the landscape of the market in 2018. I am blessed with the continuos supports to our brand and humbly thankful for making us still the market-leader for 13th years in a row.

Bye-bye 2018 and HAPPY NEW YEAR to all.

We Are Truly Sorry

Yesterday, this notice appears in most local prime newspapers and all Perodua Social Media accounts.

1. We are truly sorry for any inconvenience that our Myvi buyers have to go through since the production of Myvi was halted on 13th August 2018.
2. We are truly sorry for not being able to come forward with more details much earlier as we are not certain of when we can resume our production.
3. We are truly sorry as it took nearly two months before we can say, YES, WE ARE RESUMING OUR PRODUCTION.
4. We are truly sorry that some will still have to continue waiting as the booking is much higher than our capacity for the time being.
5. We are truly sorry, as we are not giving excuses but to admit that we do have weaknesses that we need to overcome.

Now that we are a bit more certain of the timing, we can tell you that the production is set to resume and we will begin to allocate the Myvi to our authorized outlets by mid October. We assure all our customers that the problem is now resolved.

We thank you for your endless supports to us. Under no circumstances we will cut corners and produce sub-standard products as "YOU MATTER MOST" to us. 

Post Tax Holiday - A Gloomy Beginning

As of 30th September, the Malaysian TIV is expected to close at a new record low at around 31,000 units. Despite the offer to honour the price difference between OTR price with SST and the OTR price with zero-rated GST and higher order bank, most OEMs are experiencing acute shortage in stocks, hence recording a lower registration in September. The momentum of high registration saw in the last three months suddenly ended due to inability to supply by OEMs. 

With short notice given on the introduction of Tax Holiday period, and due to unexpected high demand (including advanced purchases), OEMs were struggling to produce (and import) more, but still insufficient. The manufacturers (including vendors) needs longer time to ramp up production. To add salt to the wound, the recent "historic" Typhoon Jebi that hit Japan also disrupted the shipments of CBUs and components originating from Kobe Port and transiting ports like Hong Kong and Manila.

The TIV is expected to be lowered by 52.0 percent from 65,500 units in August to 31,300 units in September, the lowest since 2007. On the other hand, YTD, the TIV is at 455,000 units or 29,323 units higher than the same period last year; thanks to the strong Tax Holiday registration rally from June to August, 2018 which contributed  cumulative registrations of 199,000 units. 

Proton is expected to close  at 4,500 units in September, a 5,000 units lower than August whilst Honda will see a drop by 5,824 units ending at 4,965 units. Toyota too is recording a lower figure from 6,795 units in August to 3,000 units in September. Cumulatively, YTD, Proton has sold 49,234 units, Honda at 79,916 units and Toyota at 52,634 units by end of September. With the exception of Proton, the other 2 brands are recording a growth compared to the same period last year.

 In-terms of market share, Proton is expected to maintain the same share as August at 14.5 percent and Honda will improve slightly to 15.9 percent from 15.5 percent a month before. Toyota's share is likely to reduce to 9.6 percent from 13.4 percent in August. YTD, Honda is still at number 2 position with 17.6 percent market share and followed by Proton with 13.2 percent share until end of September.

Perodua continue to struggle with its prolong supply issue of Myvi due to the halted production since 13th August. Typically, Myvi contributed almost 50 percent of Perodua's monthly registration. Perodua only managed to register 9,471 units in September, the lowest in 20 years. Due to lower performance of other brands, Perodua continue to hold its number one position with 30.3 percent in September and 37.0 percent YTD at a volume of 168,203 units, an increase of 16,600 units compared to the same period last year. In addition to zero Myvi production, Perodua also started the month with almost zero inventory.

For me, lower TIV for September is expected BUT for different reason. Initially, the industry was worried about the impact due to higher OTR price as a result of the re-introduction of SST. However, with revised formula that saw cheaper OTR prices of some brands and the willingness of some other brands to absorb the increase in prices, the concern on pricing is no longer relevant. Instead, unexpectedly, the stocks now became the biggest challenge. And for Perodua, we are deeply regret and "feel" the frustration and disappointment of Myvi customers. We hope to resolve this as soon as possible. I have no other words for all those waiting for their Myvi, except than saying "we are truly sorry".

SST - Defying Prediction

Contrary to earlier simulation, the re-introduction of SST has made the OTR price of most cars lower than the previous price with GST of 6 percent. Many OEMs were ready to announce the new prices just before the Independence Day Holiday but were told to review and recalculate them, hence the delay of the announcement to 3^rd September, and hence the reduction in the prices. Using the earlier formula, majority of the brands would have been announcing the price hikes.

Prices for Honda models were among the first to go viral, indicating a reduction ranging from RM800 to RM4,800, reflecting a drop ranging from 0.5 percent to 3.1 percent from the OTR prices under the GST regime. Proton and Volkswagen Passenger Cars Malaysia (VPCM) have also released their latest prices. Other brands are expected to release their prices in a day or so as they are still seeking for clarifications from Customs over SST's formula.

According to Datuk Aishah Ahmad, the MAA President, the OTR prices for CKD units will be lower under SST compared to the GST, while the CBU would be higher. The difference is basically due to the inclusion of the Industrial Linkage Programme (ILP) in the calculation of the prices under the SST regime. Meaning, those models with higher local components will enjoy higher reduction in prices, vis-a-vis the value. There were also brands that applied Price Protection Plan to reduce their CBUs to stay competitive under this new pricing environment. 

With the new prices announced, market condition is expected to be better than what was projected earlier. General estimation (earlier on) was that the re-introduction of SST will see an increase in the OTR price of cars. Nonetheless, the public will need some adjustment period to digest the new prices. This, couple with the high advanced purchase made during the last three months will probably dampen the market momentum in September to some degrees.

On the other hand, with huge outstanding booking currently enjoyed by most OEMs, and with the commitment to honour the zero-rated GST saving to their customers, the industry will continue to see the spill over of registration and higher volume in September, though not as high as what have been seen in the month of June, July and August. The TIV for September will probably be lingering around 50,000 to 55,000 units before slipping to below 50,000 level in the following two months.

Perodua has publicly announced its new prices on 3^rd September, seeing a reduction in the prices of its 3 models; the Myvi, Axia and Bezza, by 1 to 3 percent from the previous GST 6 percent prices. 

For the Alza, two of its high end variants also sees some reduction in prices. However, the Alza standard variant's price is now slightly higher than the previous GST price, attributed to higher standard accessories added to the variant during the recent "cosmetic change". Under the new SST regime, standard accessory is now a taxable item.

For me, Malaysians should have no reason not to be happy with new prices. Despite the migration to 10 percent in  SST from a 6 percent GST , the OTR prices are now much lower. Majority of popular brands are becoming more affordable with a reduction of up to 4 percent. It is a good news after all.

Things Happened

Yesterday, with regret, Perodua came out with a very difficult but necessary announcement. This is related to the supply of Myvi. It is rather unfortunate, during this crucial moment, one of its vendor, who is supplying a crucial component for Myvi has to stop production, resulting the stoppage of Myvi line at Perodua plant. As we speak, there is no certainty on the timing of the immediate solution on the problem though the engineers of both side, including Perodua partners in Japan are doing their best to rectify the problem.

As Perodua is already operating on lean inventory as a result of high registration and delivery over the last three months, the halt will certainly affect  customers who placed their bookings in the recent months. Over the last three months, Perodua has delivered close to 30,000 units Myvi. 

In the last few days, Perodua has managed to complete the allocations of all (verified) Myvi bookings made before 1st June 2018. That was the earlier priority for Perodua, to ensure all those customers who did their bookings prior to Tax Holiday to get their cars before the beginning of SST. Perodua also managed to start delivering some orders made in June before the supply was halted on 14th August 2018.

As its normal practice, on the 1st day of every month, Perodua's Demand Supply Improvement  (DSI) system automatically allocates to the list of customers in line due to receive their cars within the month, and the respective sales outlet will be notified accordingly. From the list issued for the August's allocation, another 3,100 customers will miss the delivery due to this incident. These are part of the customers who placed their booking in June. And now, this will be the new priority for Perodua, to ensure these affected customers, will not loose out the zero-rated GST's saving they supposed to enjoy, assuming they will only receive their cars in September when SST will be re-introduced.

In addition to that, there are another 15,000 outstanding Myvi bookings  that supposed to be fulfilled from September onwards. 

Since July, with the growing booking received for Myvi (and other Perodua models) and prolonging waiting period, all Perodua customers were advised of the tentative delivery times, presumably to be after September and at revised (higher) OTR price.

As Perodua's technical team is trying hard to resume production as immediate as possible, Perodua is also finalising the details on the compensation format to be awarded to those 3,100 customers. Rest-assured, their interest will be taken care of and matter the most to Perodua. They will be notified by their respective Sales Advisor in due course. Perodua is also looking on the other affected customers and finding the best solution for everybody. Nobody wish for the unfortunate thing to happen but THINGS HAPPENED.

There were many allegations made as a result of the revelation. Perodua would not be announcing this problem if Perodua does not really care about its customers, as alleged by some. The fact that Perodua openly admitted its problem shows that it stood strongly on its "You Matter Most"'s motto. If it is true that the disruption in production of Myvi is a ploy by Perodua to delay the delivery and to charge customers with SST, why is Perodua announcing that it is working on the compensation to the affected customers? And what is the point of Perodua delaying the delivery when the SST amount will be paid to government rather than going into Perodua's profit?

For me, as things do happened, we will take this as a good lesson learned and will continue to improve our system moving forward. What more important is to solve the problem in hand and to ensure that our customers' interest are taken care of to the very best. For now, we can only humbly apologise for our weaknesses (with deep regret).

All Time High TIV - July 2018

The Malaysian automotive market continued to experience a spike as a result of "tax Holiday" recently announced by the government. July was the second month of the three months, which GST was zero rated making the OTR prices of cars much cheaper than other normal months.

The TIV for July is expected to be around 67,810 units (pending official announcement by MAA), highest in 2018 and 3,308 units or 5.1 percent higher than the previous month. All brands recorded a growth compared to same period last year. Many also did better than a month before, especially for those that started the month with higher inventory. 

The YTD TIV until end July is expected to rise to over 357,500 units, improved by 24,500 units compared to the same period 2017. This is a reflection of almost 7.4 percent growth year on year. The market has managed to register 132,312 units during the first 2 months of this Tax Holiday, or an equivalent to 37 percent contribution to the total market thus far.

"Stock is King" continued to be the denominator during this unprecedented period. Proton already announced that they did 31 percent better than June with 8,105 units registered in July, the highest in 30 months. 

Honda also hit a new record high with 12,780 registrations, up by 12 percent compared to June 2018, which also brought it back to number two position after losing it to Toyota in the previous month.

All brands are receiving an overwhelmed bookings since 1st June and now rushing to fulfil them before 31st August 2018 when Tax Holiday will end. Although, August is still within the Tax Holiday period, but as bookings are already surpassing the normal OEMs' stocks capacity, there will be customers that will receive theirs at the beginning of SST regime.  One brand already made it to the public that they will honour the "zero-rated GST" prices post August. Few others, has quietly disseminating that they will honour at half of the GST amount during its delivery in September, whilst the rest are still simulating the impact. Volume seller OEMs will have tougher time in deciding the approach as it will involve a bigger subsidy in total.

Perodua recorded a whopping 23,830 units for the month of July 2018,  4,219 units or 21.5 percent higher than June. Its July's registration has also became the monthly highest for 2018 after surpassing its 21,980 units recorded in May.

During its session with the media on 2nd August 2018, Perodua announced its 2018's 1st half performance, which includes the 17.5 percent growth in car registration. Perodua has sold 117,000 cars from January to end of June 2018, with Perodua Myvi contributed almost 41 percent and followed by Axia, Bezza and Alza at 29, 19 and 11 percents respectively. Until end June, Perodua hold a 40. 6 percent market share in Malaysia automotive market.

For me, the unexpected Tax Holiday has created a new phenomena to the industry. Public is taking full advantage of cheaper car prices market is offering. Hopefully, these 3 months superb performance by all OEMs will generate enough volume to cover the "expected slow down" from September onwards. Or, perhaps, there will be no slow down after all? Who knows?

"Uncertainties", a Bit Too Many

I

For some unclear reasons, one irresponsible person has posted one (out of hundreds) slide showing the Perodua's car OTR price simulation with and without SST. Nothing extraordinary about the slide except that it carried Perodua logo. The simulation shows that the SST will make the OTR price higher compared to with GST. It went viral and within less than 2 days, the posting was shared by more than 900.

What was leaked, seems as Perodua has officially declared a price increase when SST is to be reintroduced from 1^st September onwards, triggering members of the Media to start asking for comments and authorities were asking for the “basis”. The truth is, IT WAS NOT.

I take full responsibility and ownership of the slide. It was one of the many simulations that we have been working on to chart our business direction moving forward. There is nothing wrong about that. But, to assume that this is our final declaration on our pricing strategy during SST re-introduction, is totally wrong and misleading. Perodua is still waiting for official details from the government and will only make the official announcement at an appropriate timing. It is more than just about the SST. It is about company’s strategy enduring the market challenges ahead.

II

So happened, on the same day, there were many news reports about how the OEMs is reacting to the re-introduction of SST. The Malaysian Automotive Association (MAA) during its Press Conference shared that “there are concerns over a price hike due to SST implementation” and lowering its projection for auto sales to 585,000 units from 590,000 units this year. Proton, in a separate statement also expect prices of its cars “may go up with SST’s return”. Bernaz Auto Bhd, which is the distributor for Mazda in Malaysia went even further by declaring that they "will absorb SST if cars booked before September 1 but delivered after that".

Everybody are talking about possible OTR price increase as a result of SST. In the absent of any announcement on the new formula or structure on how the SST will be implemented, the OEMs can only simulate based on past structure of SST, and that is how (perceive) the price will be effected. Higher OTR price!!!

III

Then, there was this news too; the 2^nd National Car??

For me, I am sure government will do their best in taking care the interest of the people. It is not easy to balance between ensuring income for government and not burdening the people at large, but there are ways, for sure. However, amid the confusion, the earlier this being clarify is the better. Too much of uncertainties is not healthy.