By BERNAMA
RHB Research said a reduction in new vehicle prices will not necessarily result in higher vehicle sales as the move would affect the residual values of used vehicles.
The equity value in used vehicle residuals was typically a significant component of the down payment for a new vehicle, it said in a research note.
“A sharp contraction in used car residuals would leave some car buyers in the position where they are unable to fully fund the new vehicle of their
choice,” it explained.
The issue was compounded by the extended hire purchase financing period of up to nine years.
“A contraction in used car residuals could leave many borrowers, especially those in the lower income segment, in a negative equity position, where the old vehicle is worth less than the amount of the outstanding loan.
“Accordingly, we continue to view the potential regulatory change as a significant risk for the sector going forward,” it said.
RHB Research said the opposition coalition’s election manifesto contained pledges to gradually abolish automotive duties that could potentially bring new car prices down significantly.
The risk was that potential buyers could adopt a wait-and-see stance that would disrupt the recent positive sales trends as was the case in September 2012 when buyers deffered purchases ahead of the 2013 Budget announcement, it pointed out.
The research house said the pipeline for new model launches remained healthy with 24 launches of new and facelift vehicle variants in the first quarter (Q1) of this year.
In Q1 2013, Proton only introduced the Exora Bold, a variant of the Exora MPV while Perodua introduced the S-Series variants of the existing Myvi, Alza and Viva models. RHB Research has forecast the total industry volume this year to grow 1.5 per cent year-on-year to 637,000 units.
It said interest rates remained accomodative, although Bank Negara’s responsible lending guidelines would remain in force and could continue to affect marginal buyers at the low-end of the market dominated by the national car makers.
The limiting factors to industry growth are high absolute prices of cars in general and high household debt ratios, it said.
“The dearth of all-new models from the national manufacturers and increasingly competitive pricing strategies adopted by some non-national players mean that Proton and Perodua’s market shares will continue to be under pressure,” it said.
While the increasing affluence of national car owners resulted in many trading for more expensive non-national alternatives, the lower end of the
market continued to be squeezed by stricter hurdles to qualify for financing, it added.
-BERNAMA
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