Extension of Sales & Services Tax exemption to sustain profitability of auto players: AmResearch

PETALING JAYA: Passenger vehicle prices will continue to be 1–6% lower across the board with the extension of the Sales and Services Tax (SST) exemption, depending on car model, according to checks by AmResearch

The research house said this will benefit all auto players under its coverage in sustaining strong profitability in the next two quarters ending first-half 2021 (H1’21).

“In addition, we believe that the current low interest rate environment will prevail for the entire 2021 – which will be supportive of vehicle purchases throughout the year, it said.

While the SST exemption will continue to benefit all passenger vehicle brands across the board, the local auto sector will still be backboned by both national automakers, it added.

“Both Proton and Perodua’s fleet of vehicles are priced more attractively – with superior value propositions compared to the midtier non-national brands such as Toyota, Nissan and Honda. As at 11M2020, the combined total market share of both Proton and Perodua stood at 64% of total total industry volume (TIV). We expect a similar trend to continue in H1’21 – with the sustained strong sales momentum of the Proton X50 along with its Persona, Iriz, Exora and Saga models, and the debut of the A-segment Perodua D55L SUV,” said AmResearch.

AmResearch maintained its overweight stance on the auto sector with a TIV projection of 500,000 for 2020 and 600,000 for 2021 respectively, premised on the economic recovery post-pandemic; the surprise extension of the SST exemption – which it believe will continue to encourage consumer spending on passenger vehicles, auguring the auto sector in H1’21.

Its top pick for the sector is MBM Resources Bhd.

Source: The Sun Daily