PETALING JAYA: Even though vehicle sales are expected to be slow next year, the government should refrain from intervening and instead, focus on public transportation, says economist Yeah Kim Leng.
Speaking to FMT, the professor of economics at Sunway University’s Business School said slowing car sales was a reflection of weak consumer demand, brought upon by difficulty in obtaining loans and cautious spending by consumers.
“Increased use of public transportation could also be a contributing factor to weaker car sales and this is actually good as it means lesser pollution and congestion,” Yeah said when commenting on a report that forecasted vehicle sales to remain weak next year.
He said aside from car manufacturers, the used car market would also be affected, as declining vehicle sales would result in a build-up of inventory and slower turnover rates.
“However, despite this, government intervention is not needed as it is all part of an adjustment process.
“The government should not introduce any incentives to boost new car sales such as cutting excise duties, as this will only artificially prop up vehicle sales. We should let market forces operate naturally,” Yeah said.
Citing the high level of car ownership in the country, Yeah said the government could now focus on improving public transportation services.
Institute for Democracy and Economic Affairs (IDEAS) manager for external relations Azrul Khalib said the car industry in Malaysia was already one of the most government-assisted industries in the country.
“Actually, there are too many cars on the road. The car ownership rate in Malaysia is the third highest in the world.”
Azrul, like Yeah, said it was best to let market forces decide where the industry was headed rather than government intervention to boost car sales.
However, he believes the used car market will have an up-tick in demand as people needing to change cars may opt for a used car instead of a brand new one.
“Cars need to be changed for whatever reason. So it will be good for the used car market.”
“There might be a surplus in inventory of new cars. So, this could force the dealerships to offer huge discounts as a way to entice consumers to buy new cars instead of used cars.”
Yesterday, the Nikkei Asian Review reported that vehicle sales in Malaysia had declined in October by 14% compared with the same month last year and that this trend would continue next year.
Hong Leong Investment Bank analyst Daniel Wong was quoted as saying in the report that the sector was expected to be affected by the on-going weak consumer sentiment as well as the decline of the ringgit.