Much attention has been paid to the government’s fuel subsidy rationalisation programme, which is set to have significant ramifications on the lives of most Malaysians. The move has already seen the price of diesel rise to RM3.35 per litre, helping to reduce smuggling but also exacting an as-yet-unknown impact on the cost of living. All this before an imminent (and even more impactful) subsidy removal for RON95 petrol.
Despite this, the Malaysian Automotive Association (MAA) isn’t expecting the programme to have a huge impact on car sales. We asked about the effect of the diesel subsidy removal at the organisation’s market review event this morning, and president Mohd Shamsor Mohd Zain said that while there will be a reduction on sales, MAA does not expect it to be significant, given the small market share of diesel-powered vehicles and lack of alternatives.
“MAA feels that [the diesel subsidy removal] is still not going to disrupt the TIV [total industry volume] much, especially with the TIV [of diesel-powered vehicles] being only about four per cent of the whole TIV. And on top of that, there are not many alternatives that are available on the market to replace diesel vehicles.”
He added that while MAA has seen an impact on commercial vehicle sales due to buyers’ wait-and-see attitudes as a result of the diesel subsidy removal, the majority of the decrease reported in the first six months of the year was actually caused by the stabilisation of sales, the industry having cleared two years worth of backlog.
Mohd Shamsor, who is also UMW Toyota Motor’s marketing group director, reiterated the organisation’s stance when it came to the upcoming removal of RON95 petrol subsidies, saying that the diversity of powertrains on the market – including hybrid and electric vehicles – will help minimise the impact. “All the makes have strategies around [the subsidy removal] moving forward,” he added, although he did not elaborate on those strategies.
The fuel subsidy rationalisation programme kicked off on June 9, beginning with the raising of diesel prices in Peninsular Malaysia; targeted subsidies are still being provided under the Budi Madani scheme. Details of a similar programme for RON95 petrol have yet to be announced but is expected to be finalised soon.
In the meantime, the MAA is pressing ahead with the upwards revision of its full-year TIV target from 740,000 to 765,000 units. This comes after the industry reported a 6.6% increase in sales in the first half of the year to 390,256 units.
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